Via Credit Suisse comes some proof that the recent rally in risk has had nothing whatsoever to do with the scuttlebutt around US stimulus and everything to do with the collapse of Trump’s electoral prospects:
IMPLIED VOLS declined across asset classes last week with the notable exception of rates. US rate vol (CIRVE Index) saw its biggest weekly increase since March, up over 18nms, as a result of the US election risk premium now falling within the 1M tenor.
Not surprisingly, the increase was led by the long-end of the curve, with 1Mx30Y implied vol surging almost 30nms as the probability of a Democratic sweep increased and rate skew steepened to near 1-year high (see pg 18). In contrast, equity, oil, gold, and FX (G7) 1M implied vols all fell last week as the perceived election risk premium declined, with equity vol leading the way (VIX down 2.6 pts; V2X down 4.6 pts). See Exhibit 1.
EQUITY VOL: implied vols collapse; NKY led the decline in global index vol last week, with 1M ATM down almost 5 pts (see pg 8). SPX vols fell by a more modest 2 pts wk/wk, with 1M now trading at 21.1% while realizing 19.6%. Most of the flow have been concentrated on selling index vol, whether through VIX downside puts/put spreads (VIX put volumes outpacing calls by 1.6x over past week), S&P puts with vol knock-outs, or the usual over/underwriting activity. In RV space, the most persistent dislocation remains the richness of Tech vol, with QQQ-SPX vol
spread still screening ~99th percentile high (over past 10 years).
SKEW flattens further to 7-month low: Demand for upside calls picked up last week with the rally, with S&P call skew (3M 10D/40D ratio) surging to a 2-year high (see Exhibit 2). This helped drive skew down to its lowest level since Feb, with 3M 25D skew now in the 37th percentile low over the past year.
TERM STRUCTURE normalizes as election risk falls: S&P implied vols fell across maturities last week, with the most pronounced declines coming around the election tenors. The Dec kink in the term structure (where Dec was the highest point on the curve) disappeared as the risk of contested election fell with Biden’s polling lead widening to double digits. S&P 1M vol, which captures the Nov election, is now the lowest point on the curve (in sharp contrast with the rate vol term structure where 1M is the highest point). The S&P term structure is now upward sloping for the front 6M tenors with Mar’21 vol screening as the highest point on the curve. See Exhibit 3.
EQUITY CORRELATIONS fall on earnings: Implied correlation (1M) fell across sectors last week (led by Tech) in anticipation of earnings, with S&P 1M implied corr down 3.4 pts to 33.5% (see pg 13 for sector breakdown). SPX 6M implied corr fell even more notably, down almost 10 pts to 40%.
In other words, the equity market has told Trump ‘see ya and wouldn’t want to be ya’.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
The turd in the punchbowl is if the election is contested and it all turns messy. Landslide either way — no dramas
ChamMEMBER
True, but it there’s still the complication of the senate and house elections too. If it’s a clean sweep and one party controls all three, either way markets will roar I agree. But it could be that presidential win is clear but senate or house are on opposite sides and will stall everything again. That could make markets wobble.
NikoMEMBER
I am not sure about Trump being gone as even CNN is telling Dems they are playing games with people’s lives.
Interesting 10 min read on this Pollster’s methodology on why Trump will win. I like the questions they ask, their thinking. It’s all quite logical.
The question is, if the markets are now factoring in a Biden win, what would occur if Trump was to win? Up, Down? Who knows?
PalimpsestMEMBER
The reasoning in the pollster argument is valid. It’s also interesting to see a factor for Republicans being less inclined to answer polls. The Fivethirtyeight argument is that the ‘undecideds’ have really got an intention, but the trick is to find how that’s trending. Even if trends are away from Trump, there’s still too much time and last ditch options to be really confident about the Presidency. Moreover, unless both houses go to one party, lock up is assured. No one is confident about the Senate outcome.
Curious
The argument of a systemic bias by voters lying to pollsters as to their voting intention could be real, yes. But I don’t see why it should be accelerating now. Biden was +5 for a long time in the national polls, very steady and he is +10 now. Yes that’s not the Electoral College, but even allowing for gerrymanders in Republican states, all that really says is that if Trump is within 5 points he can muddy it, beyond that the gap is probably too much.
Maybe I’m missing something, but this doesn’t look like a US presidential campaign event of any kind, let alone one for a wildly successful candidate who is gonna romp home.
And this is a guy who struggles to remember what office he’s running for.
NikoMEMBER
in the first clip he thinks he is running for the senate.
JPKMEMBER
He must have gone to the wrong car park 🙂
DavidMEMBER
Yes you’re missing the point that he doesn’t invite anyone because of cv. Participation is online.
Wiley Wolf
Well this solves a problem for me
I have a truckload of money on the QLD election, but I overlooked the magnitude of the postal vote and that the outcome may not be decided and thus me paid out before the USA election.
So just have to wait for the one after ?
JasonMEMBER
Who have you backed in Qld?
NikoMEMBER
Labour. my guess.
Wiley Wolf
I rolled a huge but narrow win in eden monaro and received 2.00 at the tab for labor.
I see labor are now back to 1.55.
Still a good wager.
this weekend the wager for the speaker at 1.20 was a good deal, but the price has come back to 1.13.
not worth the walk to the tab
JasonMEMBER
Surely you have the TAB app?
Wiley Wolf
Cash,
they are all smiles when you place the wager,
BUT they hate it when they have to get money in to pay me out
Its worth the win to see em squirm
NikoMEMBER
don’t have betting account but just got one of my mates to put $50 on Labour in Qld.
Dominic
Is that because Freckles is almost as useless as Albo or because Palazchick is ballsy and kept the borders shut to good effect?
I’d be very cautious of betting on trump losing, the polls haven’t been accurate for many years now, there are many trump supporters who won’t admit in public because of being abused
I haven’t read all of above but I feel equity markets are telling us it’s a trump win
It’s very brave to say he’s a goner
IMO I think trump will shock everyone and win
I’d nearly go as far as saying I’d be shocked if Biden won
For me, the far more importantn result is the senate. If GOP holds on then stimulus is cooked and the US economy is in deep trouble.
BCNMEMBER
I know a couple of people who got covid and they were quite sick, I got really sick with really bad flu in Bali 2 years ago for a week I couldn’t move
I’d have to Q what all these people were dying of really, was it just covid or really people that had other serious conditions
Someone told me the other day a huge amount of people older than 70 die from flu when they have to existing health issues and covid deaths are much less than the flu. Someone may want to correct me
Even in AUST truthfully how many people died under 70
I’m not saying trump is the answer but Biden looks like an absolute numskull
The DEMS should have put up a better candidate. Couldn’t they find someone better Biden
I think trump will win on the night then it’ll be Supreme Court fighting mail in ballots for a month or 2
No idea on the senate, that’s above my pay grade
Anyway sports bet has Biden at $1.5 and Trump at $3.0 and betting market is normally accurate
What you think is not relevant. Pew and markets are telling you that you’re wrong.
Kolchak
I get that you’re going for some kind of Nostradamus stream of consciousness thing but geez Louise have you ever heard of a full stop?
NikoMEMBER
DEMS lost that ground while ago. It is well known that Dems were against locking the borders down. They called Trump racist when he banned travel from/to China.
So I am not sure if Joe was in charge that US covid deaths would have been lower.
This is well known information and most undecided voters will vote Trump as all (except for Fox) MSM are still pushing with blaming Trump 100% as if Joe would have burp as vaccine by last Jan and everyone would have been saved.
Yes, Trump has to carry fair bit of blame as he was openly against even wearing a mask but I doubt US would have experience lot less casualties in any way.
Dominic
Yep, it’s a specious argument. 220k die under Trump and ONLY 200k would’ve died under Joe. Winning?
Simon
Dead people can’t vote either.
Pessimist
I will put my money on BCN prediction as he has a better track record in predicting the future
Kolchak
Sigh. BCN just regurgitated (plagiarised) what many of us have been saying for years. That things were and still are way overdue for a correction. He’s so late to the party it ain’t funny.
And then when he extends his “foresight” to presidential elections and scientific processes, well he just underlines that he’s the latest kook to come down the turnpike.
Adilson Alves
Is Harris as president bullish for stonks?
Popliteal fossa
She’ll be as bullish for big business cronies as she was for arresting young kids and their families for skipping schoool
DingwallMEMBER
According to Goldman, anything is bullish for stocks ………………
Dominic
I think the argument is that a clear victory is a desirable outcome – by whichever side.
Right now markets are saying there will be a clear victory.
Max
My personal opinion is that the country is on a brink of some serious violence regardless on the outcome of the election. Trump win – riots, because he stole the election. Biden win – riots, because the radical left will feel emboldened to push their agenda. There is a deep divide, and not along the race or gender lines, it is an economic divide, a philosophical divide.
Whichever scenario, it can turn ugly fast. US stocks down either way, gold up.
Popliteal fossa
Spot on. The right is chronically disorganised and if Kamala Harris wins via Biden they wont protest, but the left will destroy US as their supposed mandate has been met. If Trump wins the left will continue, national guard will be dispatched, leftist cities will continue to burn.
On a tangent the whole california exodus thing is hilarious, as the reasons touted by people leaving (cost of living, homelessness, loss of safety in communitites etc.) are a result of their voting patterns. Soon to be melbourne.
gold will be up regardless of what happens and who wins. Either way US will need massive stimulus to get things going and then US will need massive stimulus to keep things going and after that US will need massive stimulus..
And so will EU.. massive stimulus to get things..
Radical left? Do you mean the radical centre-right (Dems, and most of their base). 😉
Note: GOP = economic right/far-right.
Note 2: there is basically no economic left-wing in the USA, nor in most developed countries – the closest most come is centrist/centre-right.
Let’s not conflate the political economic and social left/right spectrums…
RobotSenseiMEMBER
If the polls are to be trusted, it’s almost as if people finally aren’t buying the bullsh!t Trump is selling.
Anyway the polls are open, the mail-ins have started, people are queuing for hours to vote, turnout will not be a problem, Trump is on his last legs and 2021 is going to be an annus horribilis as all those chickens and debts he holds from a previous career come home to roost. Goodbye and good riddance.
Totes BeWoke
Trafalgar polling, the only mob to predict a Trump win in 2016, say Trump will win by a small margin.
No other polling agencies have any credibility, and frankly, really should be looking for other jobs.
Ronin8317MEMBER
Being right one doesn’t mean you’ll be right forever, and being wrong one doesn’t mean you’ll be wrong forever either.
It all depends on the turnout, especially amongst the black. Hilary couldn’t get them to come out to vote, and it remains to be seen if Biden/Harris can.
Dominic
It normally comes down to who’s offering the most ‘free sh#t’, Ronin.
On that basis Biden should win at a canter but there’s a hardcore in the US who hate the Left irrespective (the coast vs middle America), so let’s wait and see.
Curious
Buddy lightning don’t strike twice. You are forgetting in 2016 there was a large float of unknowns who went for Trump on the day. In 2020 there are many less unknowns so the polls look more solid … only question is how much the Republican gerrymander and vote suppression manages to trim what would otherwise be a winning lead to Biden.
Totes BeWoke
An American i know predicted Trump partly due to a FB page with hundreds of thousands saying they were voting Trump. He also noted the enormous turn outs. He’s getting them this time too, though you wouldn’t know watching the corrupt media.
I asked him a few months ago, and he said Trump will win the college vote in a landslide. Whatever that means.
I wouldn’t ride off Trump yet.
Too short to bet on though IMO.
Djenka
Oh boy, someone is primed for a nervous breakdown post US elections.
🙂
NikoMEMBER
lol
T
Salt prices will hit historic lows…
The Traveling Wilbur
I hear hardlynormal will be running a $1.00 upgrade special on beds of nails.
DavidMEMBER
I think you mistake DLS for someone who is heavily invested in one result or the other.
Djenka
Hmmm.. I wonder why do I think such an erroneous thinking…
😉
Win the Electoral College
Labor were a $1.10 the day before the election last year.
Totes BeWoke
Some betting agencies paid out early. Ridiculous thing is he was NEVER going to win. Didn’t have a chance, with everything except polls saying so.
I’ve seen this movie before. It was called 2016 and I know how it ends.
drb1979MEMBER
Equity market was falling last month as “concern about Biden’s tax rises”…..equity market is going up no matter what given the liquidity…..people are finding news to fit the market performance….
Gone Baby
1 wise words
Narapoia451MEMBER
Don’t ever underestimate the stupidity of the same people that reelected Bush JR. Don’t write anything off, they are capable of a level of [email protected] you can not imagine
HaneiMEMBER
who wins – don’t think it is as clear as David thinks. BUT irrespective the divide has broken and civil disorder in the US will get much much worse. Neither side will accept the result. Only an external pull to bring Americans together might. The election Mey – it is post-election and into next year (or two) that things are going to get ugly
Anglow
yeah nobody likes a loser !
SSFMEMBER
Lol Biden has zero chance of winning screencap this
…so….buy the fakeflation?
The dollars you’re pulling out of it aren’t fake 😉
Biden gets in: huge stimulus
Trump gets in: huge stimulus
Conclusion: Buy stocks
The turd in the punchbowl is if the election is contested and it all turns messy. Landslide either way — no dramas
True, but it there’s still the complication of the senate and house elections too. If it’s a clean sweep and one party controls all three, either way markets will roar I agree. But it could be that presidential win is clear but senate or house are on opposite sides and will stall everything again. That could make markets wobble.
I am not sure about Trump being gone as even CNN is telling Dems they are playing games with people’s lives.
https://twitter.com/Bill_Owen/status/1316164074980495360
Plus Joe’s ability to attract crowds is legendary.
https://twitter.com/MonarchofMayhem/status/1316192040464547842
I agree. How many elections have there been over the last 5,6 years where the polls were way off the mark?
https://luckboxmagazine.com/trends/this-pollster-says-the-polls-are-wrong-trump-will-win/
Interesting 10 min read on this Pollster’s methodology on why Trump will win. I like the questions they ask, their thinking. It’s all quite logical.
The question is, if the markets are now factoring in a Biden win, what would occur if Trump was to win? Up, Down? Who knows?
The reasoning in the pollster argument is valid. It’s also interesting to see a factor for Republicans being less inclined to answer polls. The Fivethirtyeight argument is that the ‘undecideds’ have really got an intention, but the trick is to find how that’s trending. Even if trends are away from Trump, there’s still too much time and last ditch options to be really confident about the Presidency. Moreover, unless both houses go to one party, lock up is assured. No one is confident about the Senate outcome.
The argument of a systemic bias by voters lying to pollsters as to their voting intention could be real, yes. But I don’t see why it should be accelerating now. Biden was +5 for a long time in the national polls, very steady and he is +10 now. Yes that’s not the Electoral College, but even allowing for gerrymanders in Republican states, all that really says is that if Trump is within 5 points he can muddy it, beyond that the gap is probably too much.
Here is a Latinos for Trump rally in Miami. Nice boat.
https://www.youtube.com/watch?v=HQZtOoOaWkU
Cripes. Yep don’t write him off yet.
Meh. Must be photo-shopped 😉
Here’s Joe talking to a near empty car park.
https://twitter.com/MustangGirl3/status/1315752403887706115?s=08
Maybe I’m missing something, but this doesn’t look like a US presidential campaign event of any kind, let alone one for a wildly successful candidate who is gonna romp home.
And this is a guy who struggles to remember what office he’s running for.
in the first clip he thinks he is running for the senate.
He must have gone to the wrong car park 🙂
Yes you’re missing the point that he doesn’t invite anyone because of cv. Participation is online.
Well this solves a problem for me
I have a truckload of money on the QLD election, but I overlooked the magnitude of the postal vote and that the outcome may not be decided and thus me paid out before the USA election.
So just have to wait for the one after ?
Who have you backed in Qld?
Labour. my guess.
I rolled a huge but narrow win in eden monaro and received 2.00 at the tab for labor.
I see labor are now back to 1.55.
Still a good wager.
this weekend the wager for the speaker at 1.20 was a good deal, but the price has come back to 1.13.
not worth the walk to the tab
Surely you have the TAB app?
Cash,
they are all smiles when you place the wager,
BUT they hate it when they have to get money in to pay me out
Its worth the win to see em squirm
don’t have betting account but just got one of my mates to put $50 on Labour in Qld.
Is that because Freckles is almost as useless as Albo or because Palazchick is ballsy and kept the borders shut to good effect?
LNP own polling, some how leaked, shows they cant win.
https://www.abc.net.au/news/2020-06-14/deb-frecklington-lnp-queensland-opposition-leadership-woes/12353618
I’d be very cautious of betting on trump losing, the polls haven’t been accurate for many years now, there are many trump supporters who won’t admit in public because of being abused
I haven’t read all of above but I feel equity markets are telling us it’s a trump win
It’s very brave to say he’s a goner
IMO I think trump will shock everyone and win
I’d nearly go as far as saying I’d be shocked if Biden won
It’s a fair warning. But I humbly suggest that things have changed. 220k dead Americans don’t lie.
https://www.pewresearch.org/politics/2020/10/09/amid-campaign-turmoil-biden-holds-wide-leads-on-coronavirus-unifying-the-country/
For me, the far more importantn result is the senate. If GOP holds on then stimulus is cooked and the US economy is in deep trouble.
I know a couple of people who got covid and they were quite sick, I got really sick with really bad flu in Bali 2 years ago for a week I couldn’t move
I’d have to Q what all these people were dying of really, was it just covid or really people that had other serious conditions
Someone told me the other day a huge amount of people older than 70 die from flu when they have to existing health issues and covid deaths are much less than the flu. Someone may want to correct me
Even in AUST truthfully how many people died under 70
I’m not saying trump is the answer but Biden looks like an absolute numskull
The DEMS should have put up a better candidate. Couldn’t they find someone better Biden
I think trump will win on the night then it’ll be Supreme Court fighting mail in ballots for a month or 2
No idea on the senate, that’s above my pay grade
Anyway sports bet has Biden at $1.5 and Trump at $3.0 and betting market is normally accurate
It’ll definitely be an interesting 3 months
What you think is not relevant. Pew and markets are telling you that you’re wrong.
I get that you’re going for some kind of Nostradamus stream of consciousness thing but geez Louise have you ever heard of a full stop?
DEMS lost that ground while ago. It is well known that Dems were against locking the borders down. They called Trump racist when he banned travel from/to China.
So I am not sure if Joe was in charge that US covid deaths would have been lower.
This is well known information and most undecided voters will vote Trump as all (except for Fox) MSM are still pushing with blaming Trump 100% as if Joe would have burp as vaccine by last Jan and everyone would have been saved.
Yes, Trump has to carry fair bit of blame as he was openly against even wearing a mask but I doubt US would have experience lot less casualties in any way.
Yep, it’s a specious argument. 220k die under Trump and ONLY 200k would’ve died under Joe. Winning?
Dead people can’t vote either.
I will put my money on BCN prediction as he has a better track record in predicting the future
Sigh. BCN just regurgitated (plagiarised) what many of us have been saying for years. That things were and still are way overdue for a correction. He’s so late to the party it ain’t funny.
And then when he extends his “foresight” to presidential elections and scientific processes, well he just underlines that he’s the latest kook to come down the turnpike.
Is Harris as president bullish for stonks?
She’ll be as bullish for big business cronies as she was for arresting young kids and their families for skipping schoool
According to Goldman, anything is bullish for stocks ………………
I think the argument is that a clear victory is a desirable outcome – by whichever side.
Right now markets are saying there will be a clear victory.
My personal opinion is that the country is on a brink of some serious violence regardless on the outcome of the election. Trump win – riots, because he stole the election. Biden win – riots, because the radical left will feel emboldened to push their agenda. There is a deep divide, and not along the race or gender lines, it is an economic divide, a philosophical divide.
Whichever scenario, it can turn ugly fast. US stocks down either way, gold up.
Spot on. The right is chronically disorganised and if Kamala Harris wins via Biden they wont protest, but the left will destroy US as their supposed mandate has been met. If Trump wins the left will continue, national guard will be dispatched, leftist cities will continue to burn.
On a tangent the whole california exodus thing is hilarious, as the reasons touted by people leaving (cost of living, homelessness, loss of safety in communitites etc.) are a result of their voting patterns. Soon to be melbourne.
The right is chronically disorganised […]
https://knowyourmeme.com/memes/oh-wait-youre-serious-let-me-laugh-even-harder
gold will be up regardless of what happens and who wins. Either way US will need massive stimulus to get things going and then US will need massive stimulus to keep things going and after that US will need massive stimulus..
And so will EU.. massive stimulus to get things..
Yeah
Yep – it’s that simple.
Radical left? Do you mean the radical centre-right (Dems, and most of their base). 😉
Note: GOP = economic right/far-right.
Note 2: there is basically no economic left-wing in the USA, nor in most developed countries – the closest most come is centrist/centre-right.
Let’s not conflate the political economic and social left/right spectrums…
If the polls are to be trusted, it’s almost as if people finally aren’t buying the bullsh!t Trump is selling.
Anyway the polls are open, the mail-ins have started, people are queuing for hours to vote, turnout will not be a problem, Trump is on his last legs and 2021 is going to be an annus horribilis as all those chickens and debts he holds from a previous career come home to roost. Goodbye and good riddance.
Trafalgar polling, the only mob to predict a Trump win in 2016, say Trump will win by a small margin.
No other polling agencies have any credibility, and frankly, really should be looking for other jobs.
Being right one doesn’t mean you’ll be right forever, and being wrong one doesn’t mean you’ll be wrong forever either.
It all depends on the turnout, especially amongst the black. Hilary couldn’t get them to come out to vote, and it remains to be seen if Biden/Harris can.
It normally comes down to who’s offering the most ‘free sh#t’, Ronin.
On that basis Biden should win at a canter but there’s a hardcore in the US who hate the Left irrespective (the coast vs middle America), so let’s wait and see.
Buddy lightning don’t strike twice. You are forgetting in 2016 there was a large float of unknowns who went for Trump on the day. In 2020 there are many less unknowns so the polls look more solid … only question is how much the Republican gerrymander and vote suppression manages to trim what would otherwise be a winning lead to Biden.
An American i know predicted Trump partly due to a FB page with hundreds of thousands saying they were voting Trump. He also noted the enormous turn outs. He’s getting them this time too, though you wouldn’t know watching the corrupt media.
I asked him a few months ago, and he said Trump will win the college vote in a landslide. Whatever that means.
I wouldn’t ride off Trump yet.
Too short to bet on though IMO.
Oh boy, someone is primed for a nervous breakdown post US elections.
🙂
lol
Salt prices will hit historic lows…
I hear hardlynormal will be running a $1.00 upgrade special on beds of nails.
I think you mistake DLS for someone who is heavily invested in one result or the other.
Hmmm.. I wonder why do I think such an erroneous thinking…
😉
Labor were a $1.10 the day before the election last year.
Some betting agencies paid out early. Ridiculous thing is he was NEVER going to win. Didn’t have a chance, with everything except polls saying so.
Re RWNJ Steve Tucker Latinos for Trump rally in Miami
https://www.rightwingwatch.org/people/steve-turley/
Hispanics hate the BLM “movement”
Did anyone see the movie “Weekend at Bernie’s”?
I’ve seen this movie before. It was called 2016 and I know how it ends.
Equity market was falling last month as “concern about Biden’s tax rises”…..equity market is going up no matter what given the liquidity…..people are finding news to fit the market performance….
1 wise words
Don’t ever underestimate the stupidity of the same people that reelected Bush JR. Don’t write anything off, they are capable of a level of [email protected] you can not imagine
who wins – don’t think it is as clear as David thinks. BUT irrespective the divide has broken and civil disorder in the US will get much much worse. Neither side will accept the result. Only an external pull to bring Americans together might. The election Mey – it is post-election and into next year (or two) that things are going to get ugly
yeah nobody likes a loser !
Lol Biden has zero chance of winning screencap this