Markets Daily: A simpler take on the stock rally

The story behind the US stocks rally [View in browser]( [Bloomberg]( Markets Snapshot [S&P 500 Futures]( [5,893.75]( [+0.11%]( [Shanghai Shenzhen CSI 300]( [3,925.23]( [+3.62%]( [Gold Futures]( [2,727.6]( [+0.74%]( [US 10-Year Treasury Yield]( [4.093%]( [+0.002]( Market data as of 06:32 am EST. View or Create your [Watchlist]( Market data may be delayed depending on provider agreements. Five things you need to know - [China’s central bank]( moved to support markets as data showed the economy expanding the least in six quarters. [The CSI 300]( [rallied]( and a strategist who called this year’s advance says it has [further to go](. Bridgewater Associates [has been buying](. - [Gold tops $2,700]( an ounce for the first time. [Bitcoin]( is also pushing closer toward a record high. [The yen weakened beyond 150]( per dollar, leading to a warning by a top currency official. [US stock-index futures]( point to a higher open. - [Bridgewater founder Ray Dalio]( says there’s a risk the US election result will be disputed. Meanwhile, the threat of a trade war under Donald Trump has revived talk about [the euro falling to parity]( with the dollar.  - Goldman Sachs teams up with Blackstone to package [private fund loans]( into bonds.  - A Wall Street headhunting firm used [fake job offers]( to dupe traders into providing salary details. Simple story Investors love a story, and politics makes for spicy plot lines. Just ask hedge fund manager Stan Druckenmiller, who made waves this week by telling Bloomberg Television that much of the frantic motion in markets of late reflects the pricing in of a Trump [presidential victory](. It may be true, but other explanations exist for what’s driving stocks and bonds right now — in many cases far simpler ones. Among them: positive economic trends that predate recent polls and have only tenuous connections to the executive branch at best. Data on Thursday, for instance, showed that US consumers and the labor market, more generally, are holding up well. September [retail sales]( strengthened more than forecast, while applications for [jobless benefits]( fell further than economists were expecting. Among the smattering of earnings released so far, most have surprised to the upside on metrics like sales. Banks issued almost unanimously strong guidance on their outlooks. In short, while politics may dominate the discourse, you don’t need it to explain the ascent in the S&P 500 that is approaching six straight weeks, or why [inflation worries]( are creeping back into the Treasury market. The yield on the 10-year US Treasury note is hovering around 4.11%, the highest since late July, and gold set a fresh record. Over at JonesTrading, Michael O’Rourke says it’s a little of both. Trump-themed trades are winning right now — things like crypto and the ex-president’s media stock for example — but there are other big trends at play. He said:  “Broad market strength is due to a massive broadening of the equity market rally, from the Magnificent Seven throughout the balance of the S&P 500 to mid-caps and small-caps.” A combination of a strong economy and prospects for further rate cuts are also fueling the fire, per O’Rourke. In markets, there are always many stories to choose from. —Emily Graffeo On the move - Netflix is up more than 5% in pre-market trading after the company eclipsed Wall Street’s expectations on [every major financial metric]( despite a new programming slate constrained by last year’s strikes in Hollywood. The results defied the skepticism of some analysts, who predicted that its [growth would cool down]( - [Big US banks have reaped a windfall]( from their trading desks, and investors are taking notice. The KBW Bank Index jumped 3.1% this week to the highest level since March 2022. It’s a sign that the industry has finally escaped the shadows of last year's regional banking meltdown. The gains have put banks on track for their best year since 2021. The KBW index is up 28%, outperforming the S&P 500. —Subrat Patnaik and Carmen Reinicke Europe’s grim earnings It’s been a [rough start to the European earnings season](. LVMH, ASML and Nestle all missed analyst estimates. Out of 15 MSCI Europe Index companies that have reported so far, almost half have trailed profit estimates while only 27% beat them, according to data compiled by Bloomberg Intelligence. —Michael Msika and Julien Ponthus Age of aging Wall Street's biggest banks are casting their eyes to the long-term, with Morgan Stanley riffing off the “live long and prosper” blessing of Star Trek. In a recent report, Morgan Stanley’s strategists declared “the age of aging is here.” Counterparts at JPMorgan said in a similar study that clients need to realize “demography is destiny.” According to Morgan Stanley, a million 100-year-olds will be living across five regions in 2030, while the number of people older than 65 per 100 people of working age is set to at least double in most Group of 20 nations by 2060. “The effects of demographic shifts are rippling through health systems, employment and pension schemes and are driving governments to mitigate the potential headwinds to their GDP growth,” wrote Paul Walsh of Morgan Stanley. “That said, the age of aging is creating opportunities as well.” The bank names 20 key stocks it predicts to benefit from the trend, among them Novo Nordisk and Eli Lilly. As of last week, they had together risen 57% since the start of 2023, outperforming the MSCI World Index. Although the elderly will likely rotate their portfolios into bonds, that may not be enough to stop borrowing costs from rising as households run down their savings and government budgets become more strained, said Alexander Wise and Jan Loeys of JPMorgan in their report. For more on how demographics affect markets, check out this story on [what a rapidly aging world means for investing](. —Simon Kennedy What else we’re reading - [Robotaxi flop]( leaves Tesla’s lofty stock multiple looking shaky - [IPhone 16 sales]( soar 20% in China debut as demand returns - [Real estate queen’s]( death sentence reveals risks of Vietnam boom - [Warren Buffett]( sold another slug of Bank of America stock - [Cringey LinkedIn posts]( are getting dragged on popular subreddit Please share your thoughts on how we’re doing and what we’re missing. Contact us at marketsdaily@bloomberg.net. More from Bloomberg Enjoying Markets Daily? 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