This week, the first debate between the US presidential candidates Trump and Harris is being used by the market to speculate on the results of the US presidential election. In addition, traders are closely watching the US inflation data due to be released on Wednesday to look for clues on the scale of the Fed rate cut.

"Trump Trade" VS "Harris Trade"

At 9:00 on Wednesday, September 11th, Beijing time, the first debate between Trump and Harris will take place. It is expected that the two sides will engage in intense debate on core issues such as economic performance and policy commitments. Trump's policy focuses on reducing corporate taxes, relaxing financial regulations, lowering interest rates, supporting traditional energy, and easing regulation on cryptos. Harris, on the other hand, tends to continue Biden's policies by increasing government spending, raising corporate taxes, expanding clean energy investment, and tightening AI regulation.

The debate result will not only affect the election but also have market effects on related industries. Industry insiders expect that a Harris victory will benefit renewable energy companies, electric car manufacturers, consumer stocks, and large multinational companies. Conversely, oil, natural gas, and traditional energy companies will be seen as potential beneficiaries of a Trump victory. In addition, US stocks, the US dollar, gold, and crypto stocks may also perform better in the event of a Trump victory. Current polls show similar levels of support for both sides, and debate performance may tilt the balance, becoming a key factor in determining the election result.

Attention to August CPI data

After last week's sharp stock market correction, US stocks saw a strong rebound on Monday. The S&P 500 index's 11 sectors all rose, with technology and financial stocks performing particularly well, each rising by more than 1.4%. Despite the historically poor start to September last week, with a decline of over 4%, investors re-evaluated the economic outlook after a calm weekend. Market analysts believe that investors' concerns about an economic recession may have been somewhat exaggerated last week.

The US's August CPI data will be released on Wednesday this week. The market predicts that the year-on-year CPI increase is expected to be 2.6%, a significant decrease from the previous month's 2.9%. If the data is lower than expected, it may strengthen the market's expectation of a further rate cut by the Fed in its September meeting. According to the CME Group's FedWatch Tool, the market currently expects a 71% probability of a 25 basis point rate cut by the Fed and a 29% probability of a 50 basis point rate cut.

Current Federal Reserve officials are in the traditional quiet period leading up to the September 17-18 policy meeting, so there will be no new guidance. The potential change in price adjustments around the first rate cut is expected to continue to cause some financial market volatility for the remainder of this week. Investors need to closely monitor the US's August CPI data released on Wednesday to further clarify the speed of inflation slowing in the economy.

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