Citi sees 'no major change to trading views into election' after Trump shooting

Over the weekend, former President Donald Trump survived an assassination attempt at a rally in Pennsylvania.

This shocking event has understandably dominated headlines. However, Citi analysts believe it will not significantly alter market strategies leading up to the election.

The investment bank said in a research note to clients that historical episodes of political violence suggest a potential short-term boost in Trump's poll numbers, but this may partly reverse by November.

Citi's analysts indicate that while there might be some immediate market reactions, they will likely be short-lived.

"We may see further progress in what are perceived to be the Trump election trades that do not conflict with the current Fed story," the investment bank noted. They emphasize that steepeners present the most attractive opportunities at this time, while other trades might have to wait.

In the equities market, Citi expects financials to outperform, while the foreign exchange (FX) market requires patience, as softer US data is leading to a weaker USD, according to the firm.

The bank believes Monday's price action will serve as a litmus test to gauge how much a potential Trump victory is already priced in.

Citi analysts remarked, "The market will likely gain confidence in the Trump trades, but no major change to the trading views into the election."

Despite the assassination attempt, Trump's position in the election had already gained considerable consensus among investors, highlights the bank.

"We do not think that the horrific developments over the weekend have changed much with respect to the type or timing of the trades investors should consider," Citi stated. They maintain that steepeners should work first, with USD longs needing to wait.

Looking at previous events, Citi pointed out that in the immediate aftermath of the last presidential debate, steepeners performed well in rates, financials and energy outperformed in equities, and the USD remained relatively flat in FX.

This coming week is expected to see similar patterns. "The extent of the moves will tell us something about how much of a potential Trump victory is already priced," Citi analysts concluded.