Despite recent poll shifts favoring Trump, market pricing remains cautious, according to Deutsche Bank.
The extent to which a Trump win is being priced in remains cautious despite discussions about "Trump trades" in the market. DB illustrates this in both the FX market via the US dollar and a basket of the S&P 500 companies most sensitive to tariffs.
The drop from 1.12 to 1.09 in EUR/USD is mainly due to the repricing of Fed expectations following strong US payroll numbers, they argue. Only the recent decline reflects changes in US election probabilities. They also note that a basket of S&P 500 companies sensitive to tariffs has been moving sideways, only recently starting to underperform, mirroring recent polling trends.
"The market has started to price an increasing probability of a Trump win, but the degree to which this is impacting market pricing is still quite modest," Deutsche Bank writes.
Bank of America made a similar point this week.
