I don’t usually don’t post on sunday but I felt this was important today. We had a major event yesterday and I don’t really care what side you’re on, yesterday was a sad day for all of us. It is ridiculous that we are so divided over politics, we’re all on the same team at the end of the day. This stuff is silly, politics in general barely has any implication on most of our day to day lives and I hate how the media has made it seem like every little thing coming from Washington is so important to everyone. It has completely divided us today and it is a shame. With that said there are implications for the market now.
We really couldn’t begin to price in who was winning the election until we got closer to the actual election. 8 weeks ago odds were 50/50 and that left positioning up in the air for so many things. There is always a trade regardless of who is in office. Now though after the shooting, the betting markets are pricing in a Trump win. His odds dramatically jumped overnight and he now stands as a heavy favorite with a person betting $100 on Joe Biden winning $550 if he were to win. Trump went from -180 yesterday to -300 this morning meaning one has to bet $300 to win $100 on Donald. He is the clear favorite now.
What stocks win if Trump were to win? Well if we’re going to price in a Trump win, nearly everything wins. Trump was the markets biggest cheerleader when he was President. He was constantly touting stocks as a barometer of the economy. Regardless, there may be an initial shock and rates go up as people panic over deficit spending, but he pushed for lower rates so I would expect rates to tumble in time. I would expect the dollar to weaken, and I would expect to see equities rally into the election if we’re going to price in a win for him. Trump loved infrastructure spending, he loved defense spending. Things like the XLI could do particularly well under him.
What stocks lose? There are many megacaps Donald directly took aim at previously. You have to believe he will not be very nice to companies like Google and Meta if he were to win. There are many other sectors that Trump has expressed his displeasure for, one being electric cars. So it made sense to see Elon Musk tweet his support for Trump yesterday trying to get ahead of that one as a Trump win may end subsidies for electric cars. It could be things like China begin to see headwinds, maybe renewable energy does.
There is alot to think about this morning in your positioning. No I don’t expect a civil war or anything to unfold from yesterday, we’ve always had crazy people on both sides, but if history is any guide Ronald Reagan jumped dramatically in the polls after his attempted assassination, over 20 points, and betting markets are remembering that today.
Either way, equities were going up, they have done so for 200+ years. What equities go up more than others is what we’re trying to find in here, I suspect we will see alot of positioning in the options data the next few days which will give us more clarity but it is very clear right now who the oddsmakers see winning.
Have a great Sunday and I will see you tomorrow.
Agree that politics doesn't affect as much as people think. It most likely maximizes happiness to ignore it entirely... but it's just so damn hard to with rage-bait being a currency. I don't like it.
To your point about megacaps.. current leading bet on VP is Vance, and it's right on his Wiki that he "has called to break up Google as well as implying he believes Meta should be split up".
Went heavy into bito and coin few days back allocating capital from aapl into them … had rough last week but should be up big if crypto holds up 😀