【Epoch Times News, November 2, 2024】With the outcome of the presidential election in the United States hanging in the balance, hedge funds and other investors are on the lookout for trading opportunities, considering both the potential profits in the event of a victory by former President Donald Trump and the implications that could come with a win by Vice President Kamala Harris.
As the intense campaign nears its end, some investors are exploring so-called “asymmetric trades” involving assets like Bitcoin or the Chinese Yuan. These trades could yield substantial profits if Trump emerges victorious, with minimal losses even if the bet goes awry.
Edoardo Rulli, head of hedge fund solutions at UBS, remarked, “Given the closeness of the election results, it’s challenging to make trades.”
Some betting sites are leaning towards Trump, sparking what are known as “Trump Trades,” while others predict that if Harris were to win, these trades might lose momentum or reverse course.
David Kalk, founder of Reflexive Capital, stated that under any scenario, holding a long position in Bitcoin could lead to higher returns. He projected that in the event of a Trump victory, Bitcoin’s potential upside could be two to three times risk capital. Kalk anticipated a friendlier regulatory stance towards cryptocurrency from the former president. He added, “The potential downside in the event of a Harris win seems to be far outweighed by the upside of a Trump victory.”
Patrick McMahon, founder of macro hedge fund MKP Capital Management, noted that shorting the Chinese Yuan against the US dollar could be an asymmetric trade, should Trump impose tariffs that could lead to Yuan depreciation.
Robert Christian, Chief Investment Officer at K2 Advisors, mentioned that some opt for neutral positions, pairing bearish stock positions with bullish positions to mitigate directional risk. This approach allows gains from one trade to offset losses from another.
Mario Unali, head of investment advisory at Kairos Partners, explained that the shift towards betting on a Trump victory stems from the perception that a Harris victory is more likely to maintain the status quo, thus limiting potential losses. Kairos Partners oversees a fund of hedge funds.
According to data from research firm PivotalPath, the hedge fund industry had achieved an 8.3% return in the first nine months of the year, falling short of the S&P 500 index’s 20% surge on average. This has placed additional pressure on some hedge funds, compelling them to take a more cautious approach towards the election.
Jon Caplis, CEO of PivotalPath, anticipated some selling ahead of the election, suggesting that profits could be banked for a few weeks or months, depending on how soon the election outcome becomes clearer.
Social media users have questioned whether the massive bets placed in the gambling market have influenced trading decisions or if market predictions serve as better indicators of election trends.
Trump trades involve selling government bonds, Yuan, and betting on the rise of Trump Media & Technology Group stocks.
With just a few days left until the election, the two candidates remain neck and neck, prompting some investors to question if the expectations of a Trump victory may be overstated.
According to pollster 538’s national polling average released on Thursday, Democratic presidential candidate Harris boasted a 48.1% support rate, while Trump garnered 46.7%, narrowing the gap by 1.3 percentage points since October 1.
John Luke Tyner, Head of Fixed Income and Portfolio Manager at Aptus Capital Advisors, expressed that the near-term outlook for government bonds may have been overly exaggerated. Tyner added, “If Harris wins, long-term rates could quickly retreat, but I believe this would occur under any scenario.”
Strategists at Citi Group disclosed that they recently exited some Trump trades, including a trade profitting from a rise in five-year inflation expectations, citing a change in prices and positioning deeming the risk-reward ratio unfavorable for some trades post-shift. They expressed a preference for these market dynamics over stand-alone poll numbers.
A sweeping Republican victory could heighten bond sell-offs due to anticipated higher fiscal deficits in such an outcome. Nonetheless, they noted that there is also a significant risk of a substantial reversal in the event of a Harris win.
(This article is adapted from a report by Reuters)