Hello, Tigers!
This is the first article in Tiger_Academy's special series on the US election~
Last night, Tesla surged 10% intraday, marking its second-best single-day gain of the year. From a technical perspective, Tesla's daily K-line broke out of the downward trend channel that started in July 2023, turning bullish.
Over the past week (2024/06/25-2024/07/02), Tesla's stock has risen by 26.66%, and the double-long Tesla ETF (TSLL) has soared an astonishing 55.85%!
Two main reasons account for Tesla's significant gains:
Tesla delivered 443,956 vehicles in the second quarter, surpassing Wall Street's average expectation of 439,302.
Elon Musk, representing traditional American manufacturing and industrial capital, is a staunch supporter of Trump. The market expects that Tesla's future performance is closely tied to Trump's electoral prospects.
In other words, Tesla is currently viewed as a "Trump concept stock," with Musk's political maneuvers potentially reaping greater benefits as Trump's chances of winning increase.
The speculation around Musk aligning with Trump may be the real reason behind Tesla's stock price surge. So, aside from Tesla, what other "riding coattails" opportunities exist during the US election?
1.Short-term Opportunities in the S&P 500 Index
Historically, the S&P 500 index tends to perform well in the fourth year of a US presidential term (election year).
Out of 24 election years since 1928, the S&P 500 has achieved positive returns in 83% of them, with an average return of nearly +12%, significantly higher than the +9.81% average return since 1928.
Focusing on the period since 1950, if it is the election year of a president's first term, the average gain is about +13%, with a 100% probability of an increase.
How does the S&P 500 perform in individual months of an election year?
The chart below shows that US stocks typically exhibit volatility from January to May, a summer rebound from June to August, heightened volatility and declines before the election in September and October, and a post-election rebound in November and December.
In summary, the first quarter of an election year tends to be relatively flat, with more notable performance usually occurring in the second half of the year, especially in the fourth quarter following the election.
Therefore, if you don't currently hold any positions, consider investing in the S&P 500 index ETF (SPY) through dollar-cost averaging. Even if the market fluctuates in the short term, continuous investment can lower your average cost, ultimately yielding good returns.
2.Cyclical Stocks May Make a Comeback
As Trump's chances of winning increase, cyclical stocks may make a comeback.
One of the biggest differences in the campaign platforms of Trump and Biden is their stance on traditional and renewable energy. In Trump's second-term campaign platform "FIGHTING FOR YOU," he clearly mentions continuing to implement energy independence policies.
In 2017, Trump already rejected Obama's "Climate Action Plan" and proposed the "America First Energy Plan," which focuses on reducing regulations on the energy industry, increasing domestic energy development, continuing the shale revolution, supporting clean coal technology, and revitalizing the coal industry.
This indicates that Trump will continue to support traditional energy companies like oil and coal.
It's rumored that Trump has already secured cooperation with a major company that sponsors his campaign, and if he wins, he will fully support traditional energy. This will directly benefit cyclical stocks such as traditional car manufacturers, manufacturing, biopharmaceuticals, and banks.
Ford (F), General Motors (GM), Applied Materials (AMAT), UnitedHealth Group (UNH), Eli Lilly (LLY), Wells Fargo (WFC), Bank of America (BAC)...
3.Long-term US Treasuries Might Offer a "Golden Opportunity"
Last week's core inflation data showed that the Personal Consumption Expenditures (PCE) price index increased by 2.6% year-over-year in May, down from 2.7% in April. The core PCE price index rose by 2.6%, the lowest level since March 2021.
Better-than-expected inflation data should have increased expectations for rate cuts this year, but the US election may introduce more uncertainty.
As Trump's chances of winning rise, the market is increasingly concerned about his potential actions.
Two aspects of Trump's political agenda could significantly increase inflationary pressures:
Trade: Trump advocates "America First" trade policies, proposing "reciprocal tariffs" on countries that impose export tariffs on the US. This could mean a 10% base tariff on all goods entering the US and a 60% or higher tariff on Chinese goods, raising consumer costs and driving up inflation.
Immigration: Trump's administration plans to introduce the "most stringent immigration policies in history," which could reduce the current labor supply, further driving up inflation.
The short-term performance of the 20+ Year US Treasury ETF (TLT) clearly shows investor hesitation and concerns.
In reality, there's no need to be overly pessimistic about the short-term outlook for long-term Treasuries.
May's personal income data shows a 0.5% month-over-month increase, exceeding market expectations, while personal spending only grew by 0.2%, below expectations. This comparison indicates that while the US economy remains resilient, there are emerging concerns among residents, leading to more cautious household spending.
Similarly, the personal consumption component of the Q1 US GDP final value was recently revised downward.
As I've mentioned recently, although most Fed officials remain hawkish, Powell's probing has already revealed signs of an economic slowdown in multiple areas. This week's unemployment data might further confirm this logic.
Currently, expectations for 2-3 rate cuts by the Fed this year remain unchanged. Therefore, if long-term Treasuries decline in the short term, it might present a golden buying opportunity.
The process is simple: open the Tiger Trade app, click on [Wealth], then [US Treasuries], and select bonds with a maturity period >36 months!
Comments
Great article, soar