【Weekly Wealth Trends】 Election uncertainty intensifies! What’s the investment strategy this week?

Tiger_Academy
11-05

Hello, Tiger Friends!

Starting Tuesday, November 5, the U.S. election will officially commence its final voting phase, with Harris and Trump heading into their ultimate showdown.

Weekend polling results indicate Harris is starting to gain a lead in some swing states, diverging significantly from prior surveys. This highlights the considerable uncertainty surrounding the election.

1.Low Cost-Benefit of the Trump Trade

As of now, Trump is still leading, albeit by a narrower margin.

Let’s consider a scenario: if Trump wins the election, how should the market respond?

According to CICC:

  1. In a “Republican sweep” scenario (Trump wins the presidency, and Republicans control both chambers of Congress), the “Trump trade” would likely surge further for some time, followed by a cooling-off period while awaiting actual policy implementation—similar to post-2016 election highs followed by easing in early 2017.

  2. If any outcome other than a “Republican sweep” occurs, particularly a Harris win, all Trump-related trades are likely to reverse immediately.

Citi holds a similar view. Analyst Dirk Willer’s team suggests the market has partially priced in a Trump victory, making the risk-reward of Trump-aligned trades less favorable.

Citi advises investors to take profits on certain Trump-driven positions, particularly those tied to Trump’s policy and polling improvements. While these assets have performed well since the last nonfarm payroll report, Citi believes the current risk-reward is no longer appealing.

As such, even if Trump wins, the overpricing in the market could lead to a “sell the news” reaction. In short, the potential upside for further “Trump trades” appears limited.

2.Potential Value in Reverse Trades

If Trump’s advantage diminishes or if Harris wins, could a reverse positioning strategy offer more value?

  1. Highly priced assets may face sell-offs: Many assets have already priced in a Trump lead—such as U.S. Treasuries, the dollar, gold, traditional energy, financial stocks, Bitcoin, and the Mexican and Vietnamese currencies.

  2. However, the pricing extent varies, with assets like U.S. equities, Treasuries, the dollar, gold, and Bitcoin reflecting higher Trump trade expectations than others like copper, oil, and China export-linked assets. If Trump loses, the sell-offs in overvalued assets could be more significant.

  3. Reverse “Trump trades” could dominate: Should Trump lose, dollar and Treasury yields could decline, gold may correct, and U.S. equities might face pressure, while assets impacted by Trump’s policies may find relief.

In summary, as the Trump trade’s value declines, reverse positioning may offer better returns.

3.Trading Focus This Week

Based on the above analysis, key trading directions for this week are:

A. U.S. Treasuries

Analysts agree a Republican sweep would be challenging for bondholders, who have recently endured some of the worst monthly losses in two years.

Should Harris win, however, Barclays strategists suggest this could trigger a Treasury market rebound, potentially lowering the 10-year yield by up to 0.25%.

Related Trading Options:

Asset

Code

U.S. Treasury 1-3 Month ETF-SPDR

$SPDR Bloomberg Barclays 1-3 Month T-Bill ETF(BIL)$

U.S. Treasury 7-10 Year ETF-iShares

$iShares 7-10 Year Treasury Bond ETF(IEF)$

20+ Year U.S. Treasury ETF-iShares

$iShares 20+ Year Treasury Bond ETF(TLT)$

3x Leveraged 20-Year U.S. Treasury ETF-Direxion

$Direxion Daily 20 Year Plus Treasury Bull 3x Shares(TMF)$

B. Gold

Regardless of the election outcome, factors like U.S. debt, fiscal deficits, and weakened dollar credibility remain. Additionally, geopolitical risks such as the Russia-Ukraine conflict and Middle Eastern instability further support gold’s safe-haven appeal.

Related Trading Options:

Asset

Code

SPDR Gold ETF

$SPDR Gold Shares(GLD)$

iShares Gold Trust ETF

$iShares Gold Trust(IAU)$

VanEck Gold Miners ETF

$VanEck Gold Miners ETF(GDX)$

3. Volatility Index

Historically, election years (1992, 1996, 2000, 2008, 2012, 2020) have shown significant spikes in economic policy uncertainty and the VIX Index, reflecting heightened market sentiment disturbance.

Related Trading Options:

Asset

Code

VIX Short-Term Futures ETF (VIXY.US)

$ProShares VIX Short-Term Futures ETF(VIXY)$

2x Leveraged Volatility Index Futures ETF (UVIX.US)

$2X Long VIX Futures ETF(UVIX)$

That’s the focus for this week. Feel free to share your trading ideas in the comments!

Risk Disclaimer: The above assets are selected based on data-driven assessments and do not constitute investment advice.

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US Election Wrap-up: How Will Trump Affect Market?
In the early hours of the 6th, Republican presidential candidate Trump declared victory in the 2024 presidential election. ------------------- Which asset will benefit the most?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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