Daily Review of Investment Bank/Institutional Opinions (August 22, 2024)

1. Goldman Sachs U.S. Election Forecast: Harris Likely to Win, But Could Be a "Lame Duck President"

In a research report released this week, Goldman Sachs stated that based on current conditions, the U.S. presidential election could result in a "lame duck President Harris." According to Goldman Sachs, Harris currently leads Trump by about 1.5 percentage points in national polls and has a lead in the key swing state of Pennsylvania. Overall, Harris has a 52%-54% chance of winning in November. Since taking over the challenge against Trump from Biden, Harris's election prospects have steadily improved over the past month. Since August 1 of this year, the probability of a Republican victory has decreased by 10 percentage points, while the likelihood of a Democratic victory with Republicans controlling either or both houses of Congress has increased by 11 percentage points. However, Goldman Sachs also noted that while this is the most likely scenario, the outcome remains highly uncertain.

2. Goldman Sachs: Fed's Policy Rate Expected to Drop Soon, Powell Likely to Be More Dovish

Currently, U.S. stocks are showing stability and optimism, with the market eagerly anticipating Powell's speech at the Jackson Hole Economic Symposium on Friday. Goldman Sachs outlined several key issues they hope Powell will address during the symposium. The most important is to demonstrate confidence in the inflation outlook during his speech. Goldman Sachs expects Powell to provide a more dovish message than the one given at the press conference following the July FOMC meeting, with the Fed's policy rate expected to drop soon.

3. Citigroup: Gold ETF Flows to Surge with Fed Rate Cuts

Citigroup predicts that in the next 6 to 12 months, inflows into gold ETFs will "significantly" expand, driven by the Fed's rate cuts and heightened volatility from recession risks. Strategists led by Aakash Doshi still believe that gold ETF demand will reach 275 tons by 2025. Assuming the U.S. average real yield decreases by 100 basis points, Citigroup expects total gold ETF inflows of approximately 200 tons from September 2024 to August 2025. ETF investors are likely to buy rather than sell over the next few quarters, which will typically support gold prices. The reduction in China's central bank gold purchases in the second half of the year may place greater emphasis on gold ETF purchases to support gold prices reaching $3,000 per ounce by mid-2025.

4. BlackRock: U.S. Interest Rates Too High, Policy Excessively Restrictive

Rick Rieder, BlackRock's Global Chief Investment Officer of Fixed Income, commented on the U.S. Bureau of Labor Statistics' non-farm payroll report, which showed that the U.S. added 818,000 fewer jobs than previously reported in the 12 months ending in March. He stated that such a significant preliminary revision helps confirm some of the concerns about labor market weakness in recent months. This latest report ultimately highlights the importance of the labor component in the Fed's dual mandate and suggests that the federal funds rate is excessively restrictive amid slowing inflation and economic growth.

5. Swissquote Bank: Rate Cut Pricing Unsustainable, USD Could Rebound

The Fed's July meeting minutes and the downward revision of U.S. non-farm payroll data have reinforced market expectations of upcoming rate cuts, with the USD hitting an 8-month low before rebounding. Swissquote Bank analyst Ipek Ozkardeskaya stated in a report that the swap market's re-pricing of 100 basis points of rate cuts by the end of the year seems unsustainable, and the USD could rebound.

6. MUFG: USD Unlikely to Sustain Decline Due to Payroll Data Revision

MUFG noted that if the U.S. Bureau of Labor Statistics makes an unexpected downward revision to the non-farm payroll growth data for the year ending March 2024, the USD might initially fall, but it is unlikely to sustain the decline. Analyst Derek Halpenny pointed out that while the revision might be significant, the Fed uses various metrics to assess labor market inflation risks, not just the non-farm payroll data. Unemployment rates, average hourly earnings, and other individual labor market data are also crucial. Therefore, the non-farm payroll revision data, to be released tonight at 10 PM (Beijing time), is unlikely to change the Fed's stance.

7. Capital Economics: Multiple Factors Could Lead to Further USD Decline

Capital Economics suggests that the USD may continue to decline over the coming years due to its relatively high valuation and the impact of unfavorable interest rate differentials and reduced demand for safe-haven assets. Economist Shivaan Tandon stated in a report that the Fed's rate cuts may exceed those of other countries, which means that interest rate differentials may continue to disadvantage the U.S. "We also expect risk appetite to remain strong, indicating continued pressure on the USD." Despite concerns about a recession, the U.S. economy seems set for a soft landing. Capital Economics expects the USD index (DXY) to drop to 98 by the end of 2025.

8. Capital Economics: Japan PMI Data Indicates Rapid Rebound in Economic Activity

Capital Economics stated that the rise in Japan's composite PMI indicates that the strong rebound in economic activity that began last quarter will continue into the second half of the year. Today's data showed that Japan's manufacturing PMI edged up to 49.5, while the services PMI rose to a four-month high of 54.0, well above the historical average. This brought the composite PMI to its highest level since May 2023. Although this indicator has not been a reliable guide to GDP growth in recent quarters, it has historically been consistent with year-over-year GDP growth of around 1.5%, indicating that economic activity will continue to grow.

9. ING: Euro Could Surge If Resistance Levels Are Breached

ING stated that the EUR/USD pair could extend its recent gains ahead of the Fed's upcoming rate cuts, especially if the Euro breaks through resistance levels. Analyst Chris Turner noted in a report that the U.S. presidential election in November could limit any EUR/USD rebound, but if the pair manages to sustain a breakthrough, it could surge significantly, given the very low levels of actual volatility. Turner added that ahead of the expected U.S. economic slowdown and the Fed's first rate cut in September, they are reluctant to bet against the bullish trend of the EUR/USD.

10. ING: Bank of Korea Appears to Be Moving Toward an Evident Easing Policy

ING Senior Economist Min Joo Kang wrote in a report that the Bank of Korea seems to be "clearly moving toward an easing" monetary policy. The Bank of Korea unanimously kept its policy rate unchanged today but expressed a more dovish tone for future actions. According to Kang, four out of the six board members, excluding the central bank governor, are open to a possible rate cut in the next three months, while the other two are inclined not to raise rates. Kang noted that this increases the likelihood of a rate cut in October. She added that the central bank's statement mentioned "greater confidence that inflation will approach the target level," which is another signal of imminent policy easing.

Risk Warning and Disclaimer: The market is risky, and investments should be made with caution. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their specific situation. Any investment made based on this article is at the user's own risk.