Trump-harris debate insights
A well-anticipated Presidential debate that appeared to have ended in Kamala’s favor pushed her election betting odds back in the lead. However, markets had little time to digest before a stickier-than-expected CPI, driven by a surge in OER (owner’s equivalent rent), dampened any real chance for a 50bp rate cut next week. Furthermore, the consensus playbook of 25-50-50 (rate cuts in Sep/Nov/Dec) now sees only around ~45% of a 50bp move in November, and a ~60% in December, significantly lower than the peak odds seen over the past 2 weeks.
In crypto, prices continue to follow the ebb-and-flow of equity sentiment. However, the complete lack of mention by either Presidential candidate during the debate certainly did not go unnoticed as they covered nearly every other topic including climate, economy, immigration, and healthcare. Furthermore, short-term activity appears to be waning with 1w and 1m implied volatilities continuing to decline despite the FOMC decision next week, with the volatility term structure also reverting into contango with short-dated options falling. Nevertheless, put skews remain firmly negative across the month as investors continue to prefer and brace for more short-term bearishness, while the absolute price level shall continue to follow what macro sentiment does in the near future.
The combination of a Trump-falter and a sticky CPI saw a large-scale sell-off in SPX and risk assets right at the NY open; however, a lack of follow through an announcement of a hot new $150 billion funding round for OpenAI and an 8% jump in Nvidia led bears to scramble for cover and for risk assets to make a V-shaped recovery into the close, with the Nasdaq surging an incredible +3.6% from trough to peak intraday.
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