Comments: Wall Streets eyes lock in the US election, but the actual betting is n

Source: Bloomberg

Author: ESHA DEY, JESS MENTON, Natalia Kniazhevich, Alexandra Semenova

Voters will vote for the next US president on Tuesday, which will affect the US economy's trend in the next four years.

Traders are discussing various possibilities and constantly check the latest public opinion surveys and election gaming market trends to predict who is leading Trump or Harris, and what this means for their trading positions.In some markets, some people speculate that Wall Street bets Trump.However, when it comes to this as the basis, everyone is very calm when the money is actually invested in the stock market.

Investors know that the transactions that predict the winner before the facts will usually make a lot of profit.But the problem is that the two sides are evenly matched this time, so for many investors, the risk will be unbearable if expected.

"We do not build positions in advance for the results of the election, because it is like throwing a coin," Eric Diton, president and managing of Wealth Alliance, said in an interview."Betting is meaningless."

Most traders are expected to fluctuate this week, and the fluctuations may be very large, because the result of controversy is very likely to drag the votes for weeks or even months.This explains why the volatility index of the Chicago option exchange has risen to more than 20 in the past four trading days, which usually indicates that the stock market pressure has increased.This is why investors are not so anxious to make investment options based on the expected election results.

"In the past, public opinion surveys have been wrong," said Dave Lutz, a trader and macro strategist at JoneStranding."Whoever wins or be negative is not necessarily."

Safe cash

Another challenge facing the position configuration is that there are other factors that may affect the market trend before and after the election.After the election day, the Fed will announce the interest rate decision on Thursday, and the Fed Chairman Powell will hold a press conference, which will give the central bank's interest rate path.In addition, a large number of American companies will announce their performance, including chip giants, and are expected to announce their financial reports on November 20.

This explains why Lutz has not specialized for the election.On the contrary, his suggestion is to "hold some cash" to deploy when any short -term opportunity appears, such as individual stocks or sections where the winner is settled.

"I want to say that this is how many investors operate," Lutz said.

Taking Blanke Schein Wealth Management, Robert Schein, as an example, he said that he increased the proportion of cash equivalent positions from the usual 5%to 10%before the election.His strategy is to prepare for the inevitable results of the market at least some parts of the market.

"Investors need to observe the risk of election carefully," Northern Trust Asset Management, Anwiti Bahuguna, chief investor, said in an interview."Traders cannot even build positions at this time, because the speculation is very strong, and the trader does not know what policy proposals of any candidate will actually pass it in Congress."

The market may seem nervous, which may not be surprising.The S & P 500 has traded near a historical high, while the volatility index VIX exceeds 20.The last S & P 500 index hit a record high and panic indicator VIX touched such a high level, during the outbreak of the new crown virus Delta mutation in March 2021.At the same time, hedging funds will be more volatile.The data compiled by the US Commodity Futures Trading Commission (CFTC) earlier showed that large speculators have been transferred to VIX futures for the first time since January 2019.

Beyond the general election

Insiders inside the enterprise also hesitated to invest in the stock market.Data compiled by Washington Service shows that in October, only 261 company executives purchased their own companies' stocks. At least in 2017, the sales ratio fell to the second low level since the spring of 2021.

Some Wall Street professionals said that investors seeking more secure stock bets should ignore the noise of the election.

Northern Trust's Bahuguna said election is a low probability event, so we fully expect that it will be turbulent in the next month.But in the end, the stock market supports the profit of good corporate profit, stable economic growth, decreased inflation, and the Federal Reserve's interest rate cuts."

Northern Trust is based on a strong economic performance. It is recommended to increase US stocks and low -allocated bonds to hedge the risk of inflation.The company also adds physical assets including infrastructure, natural resources and real estate to protect the influence of future turbulence in the case of protecting the investment portfolio that is still tight in the labor market and maintaining strong economic growth.

Others are paying attention to corporate profits, especially the more quality balance sheet, because the interest rate is still high when the Fed has just started interest rate cuts.

"Interest rates are still restricted, and the possibility of volatility will increase until the end of this year, so a more conservative approach is appropriate," said Brian Mulberry, a customer investment group manager of Zacks Investment Management.

All the focus of this is that in the case that there is no significant potential winner in the election, the safest way for investors is to be patient.This is the tendency of Wall Street, at least at present.