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Home / Business / The US election results make investors lose their guard when the ‘green wave’ trade clears up

The US election results make investors lose their guard when the ‘green wave’ trade clears up



Faint expectations of a decisive presidential election win for Joe Biden boosted bonds and raised the dollar as a set of transactions based on the Democrats’ “green wave” sweeping the White House and National Assembly. Assembly has stumbled.

Investors have ramped up bets in recent days that the Democrats’ decisive victory coupled with pre-voting polls will give another boost to the US economy. pandemic.

Mr. Biden could still win the presidential seat in this tight race. But Donald Trump’s victories in Florida and Ohio have undermined investors̵

7; expectations for a big Democrat victory. Strong Republican performance in some battlefield states has left money regulators prepared for the prospect that the outcome will not be clear for days and the US could be left with a divided government. turn, complicate investment prospects.

“The ‘green wave’ trade has been going since the summer and has risen even more recently, and I hope it clears up now. But beyond that, trading results in this environment makes no sense, ”said Fabiana Fedeli, the global head of fundamental equities at Robeco.

The 10-year Treasury yield (%) line chart shows Investors flocking to US government bonds with the equilibrium election

“In the short term, I think we will be sidelined,” she added, emphasizing that the stimulus and pathway of the coronavirus pandemic are much more important drivers for markets than the outcome of election.

Short-term 10-year Treasury yields skyrocketed by 0.9% on Tuesday night – hitting their highest since June – in anticipation that a major Democratic win could trigger spending government spending and potentially inflation. In turn, that is expected to put more downside pressure on long-term bond prices and drive yields up.

But yields fell back to 0.8% on Wednesday morning, reflecting how bad the fund managers were. “Markets need to take a serious look at their systems,” said Didier Saint-Georges, head of portfolio advisory at French investment firm Carmignac.

The dollar also strengthened with gains in the Treasury, up 0.4% against the euro and 0.4% against the Japanese yen.

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Futures in US stocks are volatile. Followers of the S&P 500 blue-chip index jumped 0.7% in European trade on Wednesday, almost 2% higher overnight.

The futures performance of the futures starting at 6 p.m. on November 3, 2020 (%) shows US futures fluctuating, but the big tech companies lead the way

Futures that track the Nasdaq 100 index, which has a large share of major U.S. tech corporations, rose more than 2%, briefly halted after rising sharply at one point. Tuesday night. European equities were generally lower, with the Stoxx 600 index in the region down 0.2%.

“The futures markets are pricing in Trump’s win, which I think is a bit premature,” said David Bailin, chief investment officer at Citi Private Bank.

The president raised further uncertainty early on Wednesday after he vowed to go to the Supreme Court to halt the counting of votes when he erroneously declared a race win for the White House.

“Over the next few days there will be a lot of messy news,” said Saint-Georges of Carmignac.

Additional reporting by Laurence Fletcher in London and Leo Lewis in Tokyo


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