Futu Securities learned that, Debon Securities published research reports stating that overall, the US CPI inflation has rebounded slightly, but the magnitude is limited. Trend-wise, it is still in a downward channel, with limited impact on interest rate cut expectations. However, Debon Securities believes that looking ahead, with the escalation of the Middle East situation and China's policy tightening, there is a high probability of energy price increases. There is a possibility of short-term inflation rebound, with a high likelihood of repeated interest rate cut expectations. Interest rate cut transactions may come to a temporary halt. From the perspective of capital markets in the election, when the Dow Jones performs well, the probability of the incumbent party's successful reelection is higher. Currently, the US stock market reflects a Democratic Party advantage. It is recommended to focus on investment opportunities in the inflation chain, including upstream resources and service consumption sectors in the US stock market, Hong Kong stock utilities, essential consumption, and upstream cycles.

US inflation data is still in a mild downward trend, with limited impact on interest rate cut expectations. However, Debon Securities believes there may be fluctuations in the future. Last week, the US released CPI and PPI data, where the September CPI increased by +2.4% year-on-year, slightly slower than the previous +2.5%, but slightly exceeded the expected +2.3%; month-on-month it increased by +0.2%, the same as the previous value but exceeded the expected +0.1%. Core CPI rose by +3.3% year-on-year, higher than the expected and previous values of +3.2%; month-on-month it rose by +0.3%, slightly higher than the expected +0.2% and the previous value. September PPI increased by +1.8% year-on-year, higher than the expected 1.6%, but lower than the previous 1.9%; PPI was unchanged month-on-month, lower than the previous and expected values. Overall, CPI inflation has rebounded slightly, but the magnitude is limited. Trend-wise, it is still in a downward channel, with limited impact on interest rate cut expectations. Several Federal Reserve officials have expressed no concerns about September CPI data. Currently, the CME model indicates an 89.5% probability of a 25bp interest rate cut in November, with little change compared to a week ago. However, looking ahead, with the escalation of the Middle East situation and China's policy tightening, there is a high probability of energy price increases. There is a possibility of short-term inflation rebound, with a high likelihood of repeated interest rate cut expectations. Interest rate cut transactions may come to a temporary halt.

From the perspective of capital markets in the election, when the Dow Jones performs well, the probability of the incumbent party's successful reelection is higher. According to the latest statistics from RealClear Polling, Harris' approval rating is 49.1%, while Trump's is 47.1%, with a significant difference of less than 3% even after the vice presidential debate. Debon Securities attempts to observe the election situation from the perspective of capital markets. Historically, since 1972, in 13 elections, the Dow Jones Industrial Average had positive absolute gains in October 8-10 times, with 5 instances of successful reelection by the same party; and negative absolute gains 6 times, including 5 instances of party turnover. Comparing the Dow Jones and Nasdaq, the Dow Jones had positive absolute gains and higher gains than the Nasdaq in 4 instances, with 3 instances of successful reelection by the same party. From a statistical perspective, the period of October with favorable performance by the Dow Jones has a higher probability of successful reelection by the same party. Logically, good performance by the Dow Jones typically indicates a strong US economy with low inflation, therefore, the representation of value by the Dow Jones likely shows resilience. In the current situation, as of October 12, 2024, the Dow Jones had accumulated a 4.9% increase in October 8-10, while the Nasdaq had a 4.2% increase during the same period. Whether in terms of absolute or relative gains, the Dow Jones displayed resilience, corresponding to the basic strength of the current US economy. Referring to historical statistical data, the current capital markets may suggest a Democratic Party advantage.

Allocation Strategy: Debon Securities believes that in the background of possible fluctuations in US inflation and increased stimulus measures by China, the US interest rate cut transactions may come to a halt. It is recommended to focus on investment opportunities in the inflation chain, including upstream resources and service consumption sectors in the US stock market, Hong Kong stock utilities, essential consumption, and upstream cycles.

Risk Warning: Overseas inflation rebounds exceed expectations; Global economic activity falls short of expectations; Geopolitical situations exceed expectations.