Market focus is heavy on seven key swing states that will likely determine whether Kamala Harris or Donald Trump wins the White House. Both candidates have focused heavily on Michigan, Pennsylvania, and Wisconsin - the "blue wall" states that have historically voted as a bloc and helped decide recent elections. The Sun Belt battlegrounds of Arizona, Georgia, Nevada, and North Carolina are also in play, with changing demographics and close margins making them essential pieces of each candidate's path to victory. The race has some investors hedging their bets and maintaining higher cash positions until there's more clarity, especially since final results could take days or weeks to sort out in some states.
EQUITY
Wall Street took a step back as two huge events loom this week - Tuesday's neck-and-neck presidential race and Thursday's Federal Reserve meeting, where markets expect smaller cuts. Major indexes were calm, with investors playing it safe ahead of what could be the most volatile few days. Energy stocks stood out after oil jumped 3% when OPEC+ pushed back plans to increase production. The tech sector saw an interesting shake-up, with chip giant Nvidia set to replace Intel in the Dow Jones Industrial Average starting November 8th.
GOLD
Gold prices were trading sideways, hovering above $2,730 as traders stayed on the sidelines ahead of U.S. presidential election. It could face some short-term pressure if Trump wins, with Citi analysts pointing to gold's 8.2% drop in the month after his 2016 victory as markets favour stocks instead. Yet the bigger picture looks bright for gold investors, with Citi expecting prices to climb to $3,000 per ounce in the next six months thanks to a cooling job market and growing ETF demand.
OIL
Oil prices are holding steady around $71 per barrel as traders turn their attention to today's U.S. presidential election. The market initially got a boost yesterday when OPEC+ pushed back their planned production increase, but risk remains after Iran announced plans to raise its production by 250,000 barrels per day, while a tropical storm brewing in the Gulf of Mexico is projected to cut 4 million barrels of U.S. production. China's National People's Congress meeting this week is monitored for any signs of new stimulus. Market analyst Tony Sycamore is calling it "the calm before the storm," as several major events this week could significantly impact oil's direction.
CURRENCY
The dollar is pulling back from its recent peak at 104 as currency traders rush to adjust their positions, putting major currencies like the euro and Japanese yen to gain ground against the greenback but partially recovered. Currency option markets are flashing warning signs, with one-week implied volatility for euro/dollar pairs reaching levels not seen since March 2023. The Federal Reserve is expected to cut rates by 25 basis points on Thursday, followed by Bank of England and Sweden's Riksbank.