As Biden withdraws from the campaign, the Democratic Party quickly unites to support Harris as the new presidential candidate, decreasing Trump's chances of winning and temporarily extinguishing the 'election trade'.

Citi pointed out that the market is shifting its focus from politics to economic fundamentals. What is worrying is that a series of recently released data is causing panic in the market about an economic recession, which may make the US stock market exposed to withdrawal risks in the second half of the year.

The 'election trade' has temporarily extinguished and may return after September.

On Thursday local time, Citigroup analysts including Dirk Willer released a report stating that the market may have seen the ceiling of Trump's support rate from the polls, and the 'Trump trade' is receding.

However, some 'Trump trades', such as the steepening of the yield curve and the rise of bank stocks, show stronger resilience due to fundamental support.

Citi said that the 'election trade' will temporarily come to an end, but will not completely disappear. It is expected to return later, possibly after the Federal Reserve's interest rate decision in September.

Most of Wall Street expects that the US Federal Reserve will cut interest rates for the first time this year in September, when the election will become the biggest factor affecting the US economy and capital markets. In addition, the election itself has enough risk premiums, and the policy frameworks of the two candidates have significant differences.

Citi also pointed out that certain industries, such as energy, outfits (which may be affected by tax policies), and the solar energy industry, may be affected by changes in Trump's chances of winning. As the market re-evaluates the prospects of these industries, some investors may adjust their trading strategies.

Worries about recession have increased, and US stocks may face withdrawal risks.

The signs of slowing global economic growth are increasingly apparent. For example, the manufacturing PMI data for both the United States and the Eurozone are weak, and the copper/gold ratio has further declined.

Citi also believes that the Sam rule, which predicts a recession based on the unemployment rate, may be triggered in September, further intensifying market concerns about an economic recession.

In the second quarter, US GDP exceeded expectations, and consumption remained stable. So far, most investors still believe in the narrative of a 'soft landing'. However, Citi believes that once US stocks turn downward and the credit market deteriorates, investors may begin to worry about increased risks of an economic 'hard landing'.

The poll indicator compiled by Citi shows that US stocks may face withdrawal risks in the second half of the year, especially when the uncertainty of earnings season is considered. The decline of the stock market may not be too easily captured.

Local time on July 12, the poll index triggered this alarm level. According to the poll indicator, the median performance shows that the US stock market may have a 5% withdrawal in the second half of the year.

After experiencing two weeks of volatility, this estimated decline has already been realized by half. Since July 12, the cumulative decline of the S&P 500 index has reached 2.8%.

Citi also pointed out that as global data weakens, the US dollar may continue to benefit. It is expected that the Bank of England will cut interest rates at the August meeting, and the British pound against the US dollar will be under pressure.

Editor/ping