Financial markets have been moving erratically over the past week and will probably have to wait for the outcome of the US elections and the Fed's monetary policy meeting next week to find a medium-term catalyst. In the meantime, investors are focusing on geopolitical risks and earnings releases (Alphabet, Meta, Apple and Amazon have not yet published, while Tesla's good results have helped push the indices higher). While the "Trump trade" has held the lead recently as the former Republican President appeared to be taking the lead in the polls, the trend reversed somewhat last week with profit-taking, particularly in certain sectors of the US equity markets (small & mid caps and banking in particular).
On the subject of the US presidential elections, we will note that Donald Trump's lead comes mainly from online betting sites and that these could be manipulated, as reported, for example, in an article in Les Echos (This French trader bets $45 million in crypto on Trump and upsets the US presidential election | Les Echos); the probabilities from these sites are ultimately only a reflection of bettors' stakes. The more "classic" polls are, for their part, much tighter and they generally do not exceed the threshold of materiality in the "swing states" (see graph of the week). As in the last elections, this could be decided by a few votes and the results may not be known on the same day, each State having, moreover, its own electoral rules (and contestation of the results). It is thus quite complicated to position the portfolios in one direction or the other since the result of the election is more a matter of the casino than of political or financial analysis. We therefore adopt a relatively neutral position with a rather cautious bias to the extent that the performances since the beginning of the year are, overall, relatively good.
Finally, in the rest of the news, the activity indicators published for the euro zone in October show a dynamic that remains weak. Without disappointing, the composite PMI is still in the territory of contraction of activity, although marginally, with a deterioration coming from France (whose budget we wonder how will be voted… fortunately the rating agencies are lenient). The eurozone is therefore seriously lacking fuel to get going again and the recovery of activity is awaited. The possibility that the ECB will accelerate its rate cuts is not yet part of the central scenario but nevertheless seems to be taking shape… The next monetary policy meeting will take place in more than a month and several macroeconomic data will be published between now and then to tip the balance or not.