Another day, another stock market record. Just when I think I’ll get a break from saying that line, Wall Street gets other ideas.

Today’s edition unpacks what investors have to say about Trump’s growing lead across betting markets and whether it makes a difference for equities.

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Stocks pricing in Trump 2.0?

Over the last few days, billions worth of wagers across the betting markets Kalshi and Polymarket have given Donald Trump a sizable lead for the White House over Kamala Harris. 

At the same time, the S&P 500 has notched record after record, hitting its 46th of the year this week. 

Some commentators have raised the idea that Trump’s preference for deregulation and tax cuts is juicing a market that expects him to take the White House. 

Equities are pricing in Trump 2.0, in other words.

While it is possible the so-called Trump Trade plays a role, the simpler, less sexy explanation is that investors are looking to capitalize on recent economic data and the Federal Reserve’s next move.

“The move up in US equities reflects a number of financial variables, including the critical fact that the US economy is not landing,” Joe Quinlan, head of CIO market strategy at Merrill and Bank of America Private Bank, told me.

“No hard or soft landing given that the $30 trillion behemoth continues to pleasantly surprise to the upside.”

Out this week, Bank of America’s global fund manager survey showed the biggest jump in optimism since June 2020. Investors reported a sharp increase in stock allocation and a record decline for bonds. 

Notably, no mention of a Trump Trade. 

In fact, the election registered neither as a top-three risk nor tailwind. More than half of fund managers said they expect “normal hedging activity” ahead of November 5.

The main reasons for optimism, according to the survey,: 

More than three-quarters of respondents said they expect a soft-landing scenario for the US. Easing monetary policy is a key part of the equation — and that will happen regardless of who becomes president. 

As of Wednesday, CME data showed traders see more than a 96% probability for a 25-basis-point rate cut on November 7.

Now, there is one stock worth monitoring as something that closely tracks prediction markets. 

Shares of Trump Media, the parent company to the former president’s social media platform Truth Social, have staged roughly a 70% rally over the last four weeks.

Beyond this one name that’s traded like a meme stock for months, it’s probably unwise to look to either presidential candidate as a primary driver of the stock market’s broad strength and breadth. 

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Elsewhere:

📈 Everything moved up on Wednesday. The Dow gained 0.8% to close at a record, and the Nasdaq Composite and S&P 500 also finished Wednesday higher. About 50 companies from the S&P 500 have reported earnings so far, and more than three in four have beat expectations, according to FactSet. (CNBC)

🚀 Elon Musk goes big on GOP. New government filings show the world’s richest man donated almost $75 million to the Republican party and Trump campaign via the America PAC. Musk stands among an increasingly vocal contingent of billionaires and Wall Street players who have lined up behind Trump. (Yahoo Finance)

📉 Luxury stocks took a dive. Weak earnings from LVMH led to a slump in the whole sector. The Louis Vuitton parent company pointed to weak consumer demand in China, and some analysts forecasted that recent stimulus from Beijing won’t be enough to engineer a spending rebound. L’Oreal and Hermes also saw declines on the day. (Business Insider)

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