We start in the US where stronger macro prints and Trump’s pollings have shifted narratives around growth and it is admittedly very hard to find reasons to bet on weak growth in the US right now, especially when cyclicals versus defensives in the equity space are indicating ISM manufacturing readings above 55 and crude oil suggesting that we moving into a restocking cycle. The anticipated full-on rate-cutting cycle has been abandoned and replaced by the ‘no landing scenario.’ Torsten Slok of Apollo mentioned yesterday that the Fed could opt for a pause in November, which would be more controversial than a cut, in our opinion, especially since a cut has been reasonably well telegraphed. Interestingly, this shift isn’t primarily driven by a flare-up in inflation expectations, as oil prices remain muted despite the turmoil in the Middle East. Instead, it reflects a pure growth repricing, which is quite intriguing. Admittedly, it’s hard to find reasons to bet on weak growth in the US right now, especially when cyclicals versus defensives in the equity space are indicating ISM manufacturing readings above 55, however we are also not keen to jump balls deep into the inflation story. We still think that commodities are in for a sluggish Q4 with the exception of precious metals maybe. We need much better PMI data this week to truly turn upbeat on truly cyclical assets such as Copper.   

We got Richmond Fed data for manufacturing today and it underlines what we have talked about in the last paragraph. Current conditions are still weak, but expectations for 2025 are through the roof. Can Trump deliver on all of this? 

Chart 1.a: The restocking story as predicted by crude