Macro Dragon: Trading a Trump Victory... Part One of Trading the US Elections Macro Dragon: Trading a Trump Victory... Part One of Trading the US Elections Macro Dragon: Trading a Trump Victory... Part One of Trading the US Elections

Macro Dragon: Trading a Trump Victory... Part One of Trading the US Elections

Macro 2 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: Trading a Trump Victory...

 

Top of Mind…

  • Whilst its Trillionaire Thursday today in the US, given earnings due from the likes of Apple, Amazon & Google (we also have Shopify & Facebook) – the key scheduled known unknown on the calendar is the US elections on Tues.

  • You know the Dragon’s skew on this, unchanged for a few months now… yet as is always in the interest of being world class, in whatever your craft is, one must consider all scenarios…

  • This will be One of Three pieces – with the 2nd tmr focusing on potential pathways on a Biden & Democratic Congress Victory & the 3rd also touching on the more complicated cases of a contested outcome, which will also include a 4th scenario which would be the worst case outcome from the underlying global macro framework that KVP has been operating from.

  • The ideas here are meant to be super tactical & obviously event-driven, which are always subject to where market prices & positioning are going into the events. With that said, they are also themes & names that are worth considering for long horizons, be it 3-6m or potential even up to 12-18-24months.

  • Its worth noting that generally as a rule of thumb for the Dragon, scheduled volatility events are often not underpriced – i.e. they tend to be priced correctly. That caveat, plus the feeling that a lot of money has moved to the sidelines, cash reserves have been built up & no doubt we can expect to hear a positive message from ECB’s Lagarde today (given recent resurgence & lock-down measures in the Euro-zone, technicals looking atrocious for the bulls & downright delicious for bears), leaves KVP feeling that the “true risk” is to the upside.

     

  • Yet the “real” juice of the action is likely to be sector & themed base, than necessarily the overall level of the S&P. These scenarios are predominantly focused on equities & on large US names that also offer a good range of liquid options – yet goes without saying for our VIP clients, reach out for the full cross-asset breakdown of potential pathways.

Potential Pathways & Knee-Jerk Reactions from a Trump | Republican Congress Victory:

  • Likely to be a huge relief rally for fossil fuels such as oil, shale & coal players – be they single stock names like Exxon [XOM -55% YTD], Chevron [CVX], Pioneer [PXD], Concho [CXO] or etfs XLE (energy -54% YTD), KOL (coal -27% YTD), ENFR (energy infra)

  • The Dragon loves the energy space & what’s there not to love:
    1. Its under owned. 
    2. Its massively underperformed. 
    3. There is still decent yield offering even with div cut assumptions.
    4. Valuation wise it cheap. 
    5. Its contrarian & out of favor, even vilified by many - its the anti-ESG. 
    6. The downside is likely capped when you have things like Exxon & the energy etf XLE down over 50% YTD.
    7. Fossil fuels are not going extinct anytime soon, Biden himself said likely 2050.
    8. The world will eventually open up & guess what? That's right we’ll need energy for any major infrastructure & industrial bill.

  • Can see scenario where 1-2yr 10% OTM long-dated calls in the space can return +3x to 5x, if we get a rerate to $50 to $60 oil over that period.

  • Green Tech would likely take quite a beating with individual names such as NextEra [NEE], Tesla [TSLA +385% YTD] & especially Nikola [NKLA +90% YTD] coming under pressure, but etfs like TAN (solar) & ICLN (global clean energy) which are not only c. +210% & +133% from Mar lows, but also trading at ATHs.

  • We’d likely see a relief rally in some of the Tech-antitrust names such as Facebook [FB], Apple [AAPL], Amazon [AMZN] & Alphabet [GOOGL] – i.e. as anti-trust concerns would be deemed less of a concern in this scenario. Flipside is likely neg. for CH & EM Space.

  • We could also see a pullback in some of the infrastructure plays, based on an anticipated smaller & slower infra bill from a republican controlled WH & Congress. So etfs like IFRA, XLI, IGF as well as single names like Brookfield Infra. [BIP],  Caterpillar [CAT], Deere & Co [DE], Union Pacific [UNP], United Rentals [URI], Ericson [ERIC], Nokia [NOK].   

-

Dragon Heavy Rotation

  • In case you missed it over the weekend, the first in hopefully a string of exclusive video series interviewing exceptional professionals with skin-in-the-game. We kicked off with Singapore Based, AVM Global Opportunity, run by the talented & always exceptional Ashvin Murthy.

  • The timing of the interview is uncanny as it was at the cusp of the last US presidential elections that AVM was launched. Its worth noting since the interview, the fund has also been nominated for the Singapore’s Best Hedge Fund of 2020, given its consecutive five straight positive months at the start of this volatile year.

    Please click here for interview link.

    You can follow & learn more about AVM here.

-

  • Saxo’s US Election Cheat Sheet Which cuts into the three potential pathways into the elections, probabilities around them, as well as short & long-term positions across equities, bonds, commodities & currencies.  

-

Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Idea

This is the way 

KVP

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.