Synopsis:

Nomura suggests that US election outcomes will significantly shape investment strategies. A red wave could support higher UST yields, equities, and USD strength, while a different outcome may shift focus to broader economic themes and monetary policy outlooks.

Key Points:

• Red Wave Scenario: A red wave could push 10-year UST yields above 4.50%, offering potential for equities and USD to strengthen.
• Alternative Outcome: Without a red wave, investors may find it challenging to take clear positions, with likely shifts toward themes like the US economy’s bottoming and the potential end of rate cuts.
• BoJ Rate Hike Timing: A December BoJ rate hike may hinge on a red wave, although domestic factors lean toward a rate hike by March or April.

Conclusion:

Nomura highlights a red wave as a pivotal factor for post-election strategies, supporting higher yields and stronger equities and USD. In its absence, investor focus may pivot to US economic stabilization and potential shifts in monetary policy, while BoJ rate hike expectations remain uncertain but lean toward early 2024.