US financial markets faced renewed uncertainty following a sharp equity sell-off after the midterm election results. President Donald Trump blamed the decline on the Democrats’ strong performance, while investors sought safety in US government bonds and major financial institutions remained cautious about the equity outlook.
Trump described the market decline as one of the worst days in stock market history and said falling share prices had reduced the value of Americans’ 401(k) retirement accounts. He argued that Republicans were not responsible for the sell-off and said the market would eventually recover and become bigger and stronger.
The market decline also triggered safe-haven demand for US Treasuries. The 10-year Treasury yield fell to 4.82% on Friday, its lowest level since early September. Bond traders positioned for further declines, with options trades indicating bets on the yield falling to 4.7% by the end of the following week. Another trade expiring November 20 targeted approximately 4.35%.
Bank of America Maintains a Cautious Equity Outlook
Bank of America strategist Michael Hartnett and his team maintained a risk-averse stance on US equities despite signs of stabilisation and bargain buying in beaten-down AI-related stocks.
The bank reported that equity funds attracted $92.3 billion in inflows over the four weeks ending Wednesday, the biggest increase since June. However, the team said it would become more optimistic about financial markets only if three conditions were met: the Federal Reserve stopped raising interest rates, the 10-year US Treasury yield fell below 4.5%, and oil prices declined below $80 per barrel.
Bank of America also highlighted a potential opportunity in the South Korean won. Strategist Claudio Piron said the currency’s recent weakness alongside AI-related equities could provide an opportunity to build long positions, supported by South Korea‘s sizeable current-account surplus.
Markets Await US Jobs Data for Further Direction
Markets were also awaiting the US October jobs report for further clues about the economy and the Federal Reserve‘s policy outlook. TD Securities’ Gennadiy Goldberg expected the data to be slightly weak but described the US economy as relatively strong, with low hiring and low layoffs.
Why did Trump blame Democrats for the stock market decline?
Trump attributed the sell-off to the Democrats’ strong performance in the midterm elections.
Why did US Treasury yields fall?
Investors moved towards US government bonds amid the global equity sell-off, increasing safe-haven demand.
What conditions could make Bank of America more bullish?
BofA identified an end to Federal Reserve rate hikes, a 10-year Treasury yield below 4.5% and oil prices below $80 per barrel.
How much money flowed into equity funds?
Bank of America reported $92.3 billion in equity fund inflows over the four weeks ending Wednesday.
