Domestic Politics

Over the next few months, Japan’s new government will ease fiscal policy, which will improve domestic demand on the margin. Monetary policy may tighten further in the short run but not too much over the long run. The geopolitical setting drives Japan into accommodative economic policy.

Trump may be favored, but Harris is now underrated. The Senate is highly likely to go Republican – Harris would be gridlocked if she pulled off a victory. If Trump wins it will be a full sweep. Expect volatility in the short term. 

The global political system is destabilizing and the US will turn more hawkish in foreign policy, trade policy, or both, regardless of the election outcome. Tactically go long the dollar.

Trump may be slightly favored for the White House but the US election is still extremely close. Odds of a contested or contingent election are rising, which should cause stock market volatility. A Republican sweep should cause more volatility. Democratic gridlock is next most likely but benign for stocks in the short run.

The month of October ahead of a US general election tends to be a volatile month with negative outcome for equities. As such, it is prudent to remain on the sidelines until after the election.