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First, I would like to disclose that I cannot see the future, and that if you decide to pretend you’re George Soros* and bet it all on gold two weeks before the election, I’m not liable for any losses. I would also like to disclose that these are only one man’s beliefs, and I am not recommending any investments — just having fun speculating. Now that we got that out of the way, here is a crash course on how to bet the election with the stock market.
Right now, I think that the markets have baked in a Hillary win. This will hopefully be complemented by Republican wins in the House and Senate. This scenario means gridlock, which is what we currently have, and I believe we see little to no reaction from the market. If the Democrats take the House, Senate and Presidency, I expect a minor drop.
This scenario won’t impact the stock market as much as it will impact the credit markets. This puts the federal reserve in an awkward position, because they will eventually be forced to raise interest rates (Janet Yellen will run out of excuses to keep them artificially low). This means as new debt is issued, higher interest rates need to be offered to attract new buyers. This increases the interest burden of our national debt. Bond yields rise.
Think Brexit. Sharp one-week, emotion-based market drop. If you are betting on a Trump win, you buy gold. Gold is viewed as a safe place to put your money, therefore, it does well when markets are volatile. More experienced investors could short really anything before the election (with the exception of natural gas and oil). This will be followed by a slow climb back. Markets hate uncertainty, and nothing is more uncertain than a Trump presidency. I also expect a Trump presidency to put a similar strain on credit markets; he doesn’t strike me as the frugal type.
LOL JK. Unlike the debate commission, I will at least include him.
Clinton wins and Republicans retain control of congress. I think a Clinton win sends shivers up the spines of commodity traders. I expect natural gas futures to take a hit. My bet is to buy DGAZ right before the election. It is a highly leveraged fund that tracks the inverse of the natural gas market moving $3 for every $1 that natural gas actually changes (you either lose a lot or win a lot).
It’s important to note that the stock market is not a barometer for how successful a president’s economic policies are. The stock market simply applies values to the earnings of public companies. These companies are run by executives who are not POTUS. Post-election fluctuations are emotional, and do not reflect a change in the value of the companies you are buying, selling, or holding.
*George Soros is a hedge fund manager who recently moved 50% of his hedge fund into gold before Brexit; a huge bet that paid off. Additionally, he pretty much entirely finances the Democratic party. You haven’t heard of him because he doesn’t fit the narrative that sleazy wall street white people are Republicans..
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