Several large hedge funds and money managers in the US, sensing a potential shift in momentum, are lining up behind investments that could pay off if Donald Trump beats Kamala Harris in the presidential election.
Others remain undecided in what appears to be a dead heat.
Document has previously written about how the betting market has decided that Trump is likely to win the election in less than two weeks. Now it seems that hard-nosed and cynical Wall Street investors are putting their money on the same outcome.
Although most polls continue to show a close race, with Document also expecting a dead heat on 5 November, this shift has reverberated across markets in recent weeks, boosting assets seen as benefiting from a Republican victory, writes the Wall Street Journal.
For example, private prison operator GEO Group is up 21 per cent in October, its best month since 2022, while bitcoin miner Riot Platforms is up 34 per cent.
Well-known hedge fund manager Dan Loeb sees that a Trump victory has become more likely. His firm Third Point, which manages $11 billion, is changing its investments accordingly.
– We believe that the proposed America First tariffs will increase domestic production, infrastructure spending and the prices of certain materials and commodities, he wrote in an investor letter.
– We also believe that a reduction in regulations in general, and in the Biden-Harris administration’s activist stance on antitrust in particular, will unleash productivity and a wave of corporate activity.
Mark Dowding is chief investment officer of RBC BlueBay Fixed Income at RBC BlueBay Asset Management- He, too, has stepped up trades tied to a Trump victory. Dowding manages $130bn, focusing on fixed income and currencies.
The belief that the dollar will strengthen and that the US yield curve will steepen characterises the investments.
The giant investor believes inflation will fall if Trump wins the election, and is staking billions of dollars on the predictions.
These are three examples of US hard currency investors anticipating a Trump victory, but most importantly, they see this as positive news for the US economy.
Many so-called experts warn that Trump’s promise of tariff barriers against China will hit the US economy hard. But major investors on the world’s largest stock exchange clearly see things differently.
Last week, Dowding flew from London to the US to meet with policymakers and lobbyists, and he said he was “struck by the fact that the Republicans are feeling more confident than I expected”.
– At the beginning of the week, I picked up on this narrative and I started thinking: This is a lot more skewed towards Trump than I thought, he says.
Investors are thus following the betting market, where a Trump victory is now considered most likely.
– It’s fair to say that the election has become a much bigger driver in the markets, says Themos Fiotakis, global head of currency and emerging markets macro strategy at Barclays
The recent depreciation of the Chinese yuan and Mexican peso may be due to the expectation that Trump will win the election. This could have a decisive impact on the entire global economy, and marks a resistance to the BRICS project currently being discussed in Russia.
Trump recently said that he may impose 200 per cent tariffs on cars from Mexico.
– The movements are big, and the implied movements in the options market are big, says Fiotakis.
Betting against the currencies and on the dollar «is no longer a cheap no-brainer, as it was two or three weeks ago.»
With Election Day approaching, investors are on alert for changes in competitive dynamics. Many are thinking about possible surprises on 5 November or later, especially if the results are challenged or there are delays in the counting of votes. This creates a degree of uncertainty, but at the same time an open table for people willing to gamble a few billion dollars.
It’s also the case that they have no choice. Either they bet on a Trump victory, or on Harris winning, so that the green shift and diversity hysteria can continue. Not choosing anything is impossible for large investment companies.
Because, of course, even large hedge funds don’t know what the outcome will be in less than two weeks. Some investors are betting on both possibilities.
– We don’t have a crystal ball, says Vineer Bhansali, founder of hedge fund company LongTail Alpha in California.
– Our approach is: What is not priced into the market?
He said a similar attitude paid off in 2016. Bhansali recently bought options that will pay off if the shares rise. His gains on a Harris victory will be greater because the markets currently consider her the underdog.
– The market has an expectation that a Trump win is generally good for the market and that a Kamala win will be bad for the market, he says.
– I think there is a possibility that the market could rise if Kamala wins.
But even Bhansali has hedged his investments in case Trump becomes the winner, since he expects a close race.
Others are more concerned with whether a second Trump term will help Israel, stop the war in Ukraine, or lead the world into a third world war, as teachers told my children in primary school in 2016.
There are also investors, like Zachary Kurz, founder of PinnBrook Capital, who are more concerned that people don’t vote the way investors want them to.
– The Mexican election surprised people negatively, the Indian election surprised people negatively, and the French election surprised people negatively, Kurz said.
When Kurz uses the term people, it’s safe to assume he’s not talking about ordinary working people. After all, he lives in a very different world from plumbers and unemployed factory workers.
Document reports from the election drama in a live broadcast on election night. So you don’t have to follow Tove Bjørgås and “experts” like Eirik Løkke if your priorities are a little different.
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