Trading The US Election

Risks and Opportunities in Election-Driven Market Movements

With the upcoming election, it’s crucial to have a well-thought-out strategy that allows us to capitalise on market movements while managing risks effectively. In this webinar, let’s explore trading opportunities, plan our trading approach, and prepare as thoroughly as possible.

The Plan for Election Night

Identify which markets are likely to offer the most significant opportunities. This involves anticipating how these markets might react under different election scenarios. Once the results start coming in, observe the price responses and adjust trading decisions according to your risk management plan.

Which Markets Might Move the Most?

If Trump wins, we can expect bullish moves in several areas. Cryptocurrencies like Bitcoin (BTC), COIN, and MSTR could benefit, as well as fossil fuel companies such as ExxonMobil (XOM) and Chevron (CVX). Defense stocks like Lockheed Martin (LMT) and Northrop Grumman (NOC) may also see gains. A Trump victory is generally viewed as positive for the stock market and the US dollar, thanks to anticipated capital gains and deregulation policies. Additionally, Trump Media (DJT) could see a boost.

If Harris wins, we could see bullish momentum in clean and green energy sectors, including stocks like Tesla (TSLA), First Solar (FSLR), and Plug Power (PLUG). China and Mexico could also benefit, reflected in moves in the MXN and CNH currencies. A Harris win might also support other currencies like the EUR and GBP, as well as healthcare stocks such as Abbott (ABT), Teladoc (TDOC), and Pfizer (PFE).

The tech sector, on the other hand, could be influenced in various ways, depending on the election outcome. A lower tax and regulation environment under a Republican administration might favor big tech companies. However, tech censorship has been a significant concern for Republicans, which could complicate this outlook. While Democrats’ higher tax policies might hurt tech, their diplomatic approach to international trade could be a positive factor. It’s essential to observe how tech stocks react as election results unfold.

Strength of the Win and Its Impact

The strength of the win also plays a significant role in determining market reactions. A Republican sweep would likely be bullish for oil and gas stocks, whereas a split Congress could lead to mixed reactions. It’s important to remember that election results may take time to finalise, and the markets dislike uncertainty. An uncertified electoral result could be particularly bearish, as it suggests no clear leadership and heightens uncertainty.

Create Your Own Plan

It’s important to have a clear plan in place before trading election night. Decide which markets you want to focus on under specific conditions, identify the best potential opportunities, and determine how much risk you are willing to take. Consider whether you want to trade the results immediately or wait for more clarity. Being crystal clear on your strategy will help you stay disciplined and manage risks effectively.

Final Thoughts

Election night presents a potential opportunity to react quickly to news and results, but there is also the possibility of a reprice or uncertainty trade lasting several days or even weeks. Keep your risk managed, stay prepared, and be ready to adapt to changing conditions as the election results come in.