Recently, the latest Non-Farm Payrolls (NFP) report in the United States showed a strong performance, easing market concerns about an economic hard landing. With the strong performance in the labor market, rising oil prices, and other factors, the market is refocusing on inflation expectations.
In this scenario, Citigroup analyst Dirk Willer believes that risk assets and the US dollar will benefit, while long-duration bond assets may come under pressure:
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Concerns about an economic hard landing have been replaced by inflation expectations, mainly due to a stable job market, rising oil prices, and other factors. The inflation scenario is favorable for risk assets and the US dollar, but unfavorable for long-term bonds.
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Furthermore, as the US election approaches, political factors are gradually becoming a significant variable affecting the market:
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The timing for election trading has arrived - given the possibility of continued close polls, it is expected that the market will start hedging against risks.
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<h2>Forget Hard Landing, Trade Inflation Again</h2>
Willer mentioned in the report that the recent Non-Farm Payrolls (NFP) report showed a strong performance, dispelling market concerns about a hard landing in the US economy. The market is now back to expecting a soft landing and inflation.
Willer added that Citigroup economists have been closely monitoring the risk of a hard landing due to a weak job market, but the latest data shows that apart from the job market, other economic indicators in the US have been improving since the beginning of this year. This shift is driving the market to reassess economic trends and investment strategies.
Moreover, factors supporting the inflation expectations not only come from the job market - the significant rebound in oil prices has also boosted inflation expectations. In addition, Willer believes that China's proactive fiscal policy is also playing a supportive role.
In terms of asset prices, in the context of inflation, risk assets are generally performing well. Willer wrote:
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According to our research, if the market continues to trade on inflation again, we expect strong performance in US stocks and credit markets in the next three months, especially bulk commodities like industrial metals will also benefit.
Duration assets, especially US bonds, are expected to underperform, while the US dollar will continue to strengthen.
In terms of sectors, the technology, industrial, and financial sectors are expected to lead the way.
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<h2>Beware of Trump</h2>
As the US election approaches, market focus is shifting from macroeconomic data to political developments. Willer's team expects investors to reduce positions that may be damaged by a Trump victory and may purchase hedging tools against such an outcome.
Furthermore, Willer advises investors in the report to choose election trading strategies that align with macro trends:
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We prefer election trading strategies that align with macro trends... Given the high uncertainty of the election results, we recommend avoiding trades that contradict current macro trends
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Inflationary conditions are favorable for risk assets and the US dollar, but unfavorable for long-term bonds; as the US election approaches, political factors are gradually becoming an important variable affecting the market

- The recent U.S. non-farm payroll report alleviated concerns about an economic hard landing, shifting market focus to re-inflation expectations driven by a strong labor market and rising oil prices.  
- Citigroup analyst Dirk Willer suggests that risk assets and the dollar will benefit from this re-inflation outlook, while long-duration bonds may face pressure.  
- As the U.S. election approaches, political factors are becoming increasingly significant, prompting investors to hedge against potential risks associated with a Trump victory.

Current Global Market: Forget hard landing, trade inflation again, beware of Trump