The US economy is in gear: wages rose 3.1% and non-farm-payrolls climbed by 250,000 in Friday’s report, increasing speculation the Fed will hike more than previously thought. 10-year Treasuries are back above 3.25%.
Otherwise, nail-biting has ensued ahead of tomorrow’s mid-term congressional elections in the US. Headlines saying Democrats have a slight lead on Republicans mean nothing, because the configuration of voting (as with the 2016 presidential elections) varies for each individual election. The elections’ impact on markets is extremely uncertain. Should Congress split (Democrats regain House, Republicans retain Senate), expect more volatility and an intensified risk premium. Unsettling investors are images of Iranians burning US flags and chanting “Death to America” on the near-anniversary of the 1979 Islamic Revolution, in the prelude to impending US sanctions. Oil prices were slightly lower, as waivers allow buyers to import Iranian crude for awhile. Medium term, sanctions will tighten oil markets and push crude prices higher. What to do? Short equities, long USD, but avoid safe haven in gold or JPY.
By Peter Rosenstreich
