Reward 500 Tiger-coinsHello，Tigers!
Welcome to the third installment of Tiger_Academy’s series on the U.S. Election! In this article, I’ll highlight the potential investment opportunities amid the recent macroeconomic data fluctuations.
PS:
Since the start of this election series, we've received tremendous positive feedback. Feel free to check out the first two articles:
[US Election Series 01] Tesla soar 10% overnight: What new opportunities arise with the US election?
[US Election Series #02] Finding Certainty Amid Election Uncertainty: Defensive Assets Are a Must!
Main Content:
Recently, investors who went long on TESLA have reaped significant gains! Over the last 11 trading days, TESLA has continuously risen, with an impressive increase of 44.19%, marking the longest streak in nearly a year.
As TESLA’s stock surges, bearish voices naturally emerge. Currently, Wall Street analysts are highly divided on TESLA’s future stock price, with the highest and lowest price targets differing by approximately $200.
The relentless rally of TESLA has left many seasoned investors baffled. “Bond King” Bill Gross remarked, "TESLA’s rise resembles a meme stock frenzy. The company's fundamentals continue to weaken, yet the stock price soars. It seems like a new meme stock emerges every other day, most of which are pump-and-dump schemes."
Regardless of market sentiment towards TESLA, we must acknowledge certain risks. The inability of such supergiants to further boost indices might signal a broader market decline in other sectors.
The next market opportunities are likely to stem from upcoming economic data releases! Notably, the inflation report due on Thursday, July 11, is a crucial data point that could disrupt market calm.
J.P. Morgan traders have outlined six potential scenarios for the U.S. CPI report this week and forecasted the S&P 500’s response:
Scenario 1 | CPI rises 0.15%-0.2% MoM (35% probability) | In this scenario, J.P. Morgan traders expect the S&P 500 to rise 0.5%-1%, as such data would amplify calls for a Fed rate cut in September. Key here is whether the inflation cooling is due to housing prices, a major sticky inflation contributor. Any significant cooling in housing prices would be welcomed and could signal further inflation easing. |
Scenario 2 | CPI rises 0.2%-0.25% MoM (30% probability) | J.P. Morgan believes that whether the figure is 0.2% or 0.25% will significantly impact the initial market reaction. A 0.25% figure could round up to 0.3%, likely eliciting a negative response, whereas 0.2% could be seen positively. In this scenario, the S&P 500 is expected to rise 0.25%-0.75%. |
Scenario 3 | CPI rises 0.25%-0.3% MoM (15% probability) | Here, the S&P 500 is expected to fall 0.75%-1.25%, as such a report may indicate rising housing inflation. |
Scenario 4 | CPI rises 0.1%-0.15% MoM (15% probability) | Investors favor this outcome, as it may suggest accelerating cooling in commodity inflation. In this case, the S&P 500 could rise 1%-1.5%. |
Scenario 5 | CPI rises over 0.3% MoM (2.5% probability) | A scorching inflation report would trigger a 1.25%-2.5% drop in the S&P 500. This scenario represents the first tail risk, potentially reversing the cooling trend in core goods inflation and boosting monthly inflation data. Depending on specific CPI figures and recent weak growth data, the best-case scenario might shift towards a recession narrative. |
Scenario 6 | CPI rises less than 0.1% MoM (2.5% probability) | This tail risk would push the S&P 500 up 1%-1.75%. J.P. Morgan traders note that this could even spark calls for a rate cut as early as July. |
Summary:
If core CPI hovers around 0.2%, meeting expectations, the market is likely to rise (30% probability).
If it falls below 0.2%, the market will rally (52.5% probability).
If it exceeds 0.25% (rounding up to 0.3%), the market will decline (17.5% probability).
From this report, we can see that analysts estimate a high probability (over 80%) that core CPI will either meet or exceed expectations. Inflation cooling, driving rate cut expectations, seems almost certain, which would directly benefit long-term U.S. Treasuries.
In fact, Wall Street traders have already begun to act.
According to Bloomberg data, since July 1, daily position data shows traders increasing bullish bets on bonds ahead of the Fed Chair’s testimony to Congress and the consumer price index release this week. If Powell's speech or Thursday’s inflation data bolsters expectations for a rate cut this year, these bets will benefit.
For retail investors, there are two straightforward ways to participate in U.S. Treasury trading:
Purchase Treasury ETFs, $iShares 20+ Year Treasury Bond ETF(TLT)$
Directly buy U.S. Treasuries; it’s simple: open the Tiger Trade app, click [Wealth], select [U.S. Treasuries], and choose bonds with a maturity >36 months!
Leave a comment with your top investment picks for the U.S. election, and you might win some Tiger Coins!
Comments
Trump is vying to be elected as president so not surprising $Trump Media & Technology(DJT)$ will surge if he wins...
keep fingers crossed [Great] [Great] [Great]
@rL @Aqa @koolgal @LMSunshine @TigerGPT @GoodLife99 @Universe宇宙 @Shyon @HelenJanet @SPACE ROCKET
Leave a comment with your top investment picks for the U.S. election, and you might win some Tiger Coins!
🌟🌟$Trump Media & Technology(DJT)$ is very much a Trump stock as he owns almost 65% of its shares. The current market capitalisation stands at USD 5.47 billlion even though it does not have much revenue. However if Trump wins the Presidential Election. $Trump Media & Technology(DJT)$ will go up like a rocket to the moon!
Another potential trade to look out for is Bitcoin. Donald Trump will speak at Bitcoin 2024 Conference in Nashville Tennessee on July 27. He presented himself as a champion for cryptocurrencies during a San Francisco fundraiser in June. Trump also said that he would like to see more Bitcoin mining by US firms.
So I would be looking to invest in $iShares Bitcoin Trust(IBIT)$ which is the biggest Spot Bitcoin ETF. It is currently down almost 5% this week but is still up 22% year todate.
Many thanks @Tiger_Academy for your valuable insights on what to invest in for this US Election Year.
@TigerStars @Tiger_comments