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

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo 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 or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

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. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

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

The information or the products and services referred to on this site 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 are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

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