Will the "Trump Trade" resume, replicating the investment strategy of 2016? Buying bank stocks and small-cap stocks.
Until the US presidential election voting day on November 5.Approaching in the next 2 weeks.. Republican presidential candidate Mr. Donald Trump leads in opinion polls, gradually increasing the possibility of victory. According to the average betting market provided by the political site Real Clear Politics, Mr. Trump's election probability has reached a high level of 59% since July 22, significantly pulling away from Harris, the Democratic rival, at 40%.
At the same time, the "Trump Trade" has regained momentum. Strategists at Bank of America point out that investors seem to prefer investment targets that performed well after Trump's victory in 2016.
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What happened in 2016?
According to the latest report from Bank of America Corp, the most high-performing assets in the month after the 2016 election were,Regional bank stocks, petroleum stocks, and small-cap stocks each rose by 24.5%, 14.8%, and 14.4%, respectively.Copper and the industrial sector also showed increases of over 10%, $S&P 500 Index (.SPX.US)$and the dollar recorded a single-digit increase.
On the other hand,Clean energy, gold, and 30-year US Treasury bondshad the worst performance, eachDecreased by 5.2%, 8.2%, and 8.7%.did.
Investors are beginning to invest proactively in assets that led the increase in 2016, such as banks, small-cap stocks, and the dollar. It is linked to the performance of regional banks. $Spdr Series Trust S&P Regional Bkg Etf (KRE.US)$Has risen by over 5% so far this month, representing small-cap stocks. $Russell 2000 Index (.RUT.US)$Is approaching an all-time high. $USD (USDindex.FX)$Continue to rise.
At the same time, the "Trump Trade" has regained momentum. Strategists at Bank of America point out that investors seem to prefer investment targets that performed well after Trump's victory in 2016.
According to the latest report from Bank of America Corp, the most high-performing assets in the month after the 2016 election were,Regional bank stocks, petroleum stocks, and small-cap stocks each rose by 24.5%, 14.8%, and 14.4%, respectively.Copper and the industrial sector also showed increases of over 10%, $S&P 500 Index (.SPX.US)$and the dollar recorded a single-digit increase.
On the other hand,Clean energy, gold, and 30-year US Treasury bondshad the worst performance, eachDecreased by 5.2%, 8.2%, and 8.7%.did.
Investors are beginning to invest proactively in assets that led the increase in 2016, such as banks, small-cap stocks, and the dollar. It is linked to the performance of regional banks. $Spdr Series Trust S&P Regional Bkg Etf (KRE.US)$Has risen by over 5% so far this month, representing small-cap stocks. $Russell 2000 Index (.RUT.US)$Is approaching an all-time high. $USD (USDindex.FX)$Continue to rise.
Institutions, from the core of Mr. Trump's policies, the political and economic environment, and the current performance of assets, are discussing the topic."Trump Trade" is somewhat similar to the fourth quarter of 2016.But the extent is not yet at that level.
Next year, in addition to the President,the combination of both Houses of Congressmay be more important. As things stand now, in addition to the President, the most uncertain is still the House of Representatives, and there is a high possibility that the Senate will return to Republican hands. Therefore, if Mr. Trump becomes President, there are two possibilities: either the Republicans will have a majority in both Houses, or the scenario of President (Republican) + Senate (Republican) + House of Representatives (Democratic) will arise.
The scenario where the Republican Party holds the majority in the House of Representatives is the least likely in recent years (10%), but perhapsthe most favorable for the market.for the market.It would be a scenario. Historically, this scenario is relatively favorable for risk assets and commodities. In particular, US stocks have generated a return of as much as 24.3% during a presidential term, while gold, crude oil, and copper have all risen.
Mr. Trumpmay advocate for fiscal policies such as tax cuts.There is also a possibility of implementing significant tax cuts to boost US economic growth, but there might be supply-side inflation risks due to tariff hikes and immigration restrictions.
However,if the Republican party loses the majority in the House of Representatives,the market's risk aversion tendencies would be the strongest.strongest market risk avoidance inclination occursIn this case, US bonds and gold showed the best performance, but US stocks were weak due to the high risks of tariffs and trade frictions.
The notable point is that recentlywhile the price of gold has surged to historical highs, crude oil continues to decline.This is in contrast to the trend after the 2016 election when gold fell and oil rose.
The price of gold has repeatedly hit record highs, reaching $2720, driven by increased demand as a safe haven due to escalating tensions in the Middle East and the tightening US election. Gold is one of the best-performing commodities in 2024, rising over 30% year-to-date. The recent rate cuts by the Federal Reserve and continued central bank gold purchases are key factors supporting this surge in gold.
Michael Widmer, the commodity analyst at Bank of America, attributes the macroeconomic uncertainties, rising debt levels, and central bank gold purchases as factors that make gold "the ultimate safe haven", predicting that the gold price will reach $3000 per ounce in the first half of this year. The decisive factor underpinning the bullish outlook for gold is the US fiscal situation.
According to government forecasts,the share of national debt in the US economy is expected to reach a record high within 3 years.Mr. Widmar said, "Regardless of who wins the 2024 presidential election, they will face an unprecedented fiscal situation upon taking office. Neither Ms. Harris nor Mr. Trump seems to prioritize fiscal reconstruction."
In contrast to gold,the current price of crude oil is around $70, significantly below previous peaks.Concerns over demand from China, the world's largest importer of oil, and easing concerns about potential supply disruptions in the Middle East led to a more than 7% drop in oil prices last week.
JP Morgan's Commodity Research Division pointed out that Brent crude prices could decline to an average of $80 in the fourth quarter of 2024, $75 in 2025, and potentially slightly above $60 by the end of 2025.
Asset investments are influenced by multiple factors, with U.S. elections being just one element.Given the different international and macroeconomic situations from 2016, investments based on past experiences require a more comprehensive approach.Considering the different international and macroeconomic situations from 2016, investments based on past experiences require a more comprehensive approach.
-moomoo News by Evelyn
Source: Bloomberg, JP Morgan, CICC
This article uses automatic translation in part.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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