Long VIX Futures, AUD/USD Volatility Among BofAML US Vote Trades
Source: BFW (Bloomberg First Word)
Tickers
VXX US (iPATH S&P 500 VIX Short-Term Futures ETN)
IWM US (iShares Russell 2000 ETF)
XRT US (SPDR S&P Retail ETF)
SPY US (SPDR S&P500 ETF Trust)
People
Michael Hartnett (Bank of America Corp)
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UUID: 7947283
(Bloomberg) -- BofAML investment strategists led by Michael Hartnett list eight trades for the Nov. 8 U.S. presidential election, in client note.
Alert: HALISTER1- Go long VIX futures, as the vote is likely to be close and the cost of a Nov. hedge has fallen to the 19th percentile vs. the past year
- Both candidates have policies targeted at raising wages and reducing inequality, which could lead to higher inflation or stagflation; will likely be positive for TIPS
- Proposals for higher minimum wages, paid family leave and higher taxation on the rich could be positive for U.S. municipal bonds
- Favors long global E-commerce (BIGECOM), short fast-food restaurants (BINAFCRC); long mass retailers (BRUSMASS), short luxury goods makers (SPGLGUP), long fiscal stimulus
- Best way to leverage fiscal stimulus under either president is via infrastructure spending and defense spending, so favor longs in U.S. aerospace & defense (S5AEROX), materials (S5MATR), and large-cap banks (S5BANKX)
- NOTE: Stimulus is the primary reason BofAML rates strategists see higher U.S. bond yields in 2017
- Go long AUD/USD volatility, which would benefit in a risk- off scenario in the event of a Trump victory
- Trans-Pacific Partnership may be at greater risk under Trump; a reduction in global trade would likely be most negative for EM, Germany and Japan, while U.S. small caps would benefit from any protectionism-led inflation and have less foreign exposure, so best trade is long U.S. small caps, short EM
- A Trump win could mean lower capital flows to the U,S,, a rise in UST yields and a weaker USD, all of which would be positive for gold
- Would also raise expectations that populist parties in Europe in 2017 could rise to power and increase the EU disintegration risk premium, so favor long gold vs short European banks (SX7E)
- Recommend selling USD vs MXN on a Clinton victory as MXN appears 15% undervalued after polls showing gains by Trump
- Long health care services (SPSIHPTR), short biotech (XNBI) is a good way to leverage a Clinton win, given her promises of a tax break for health-care services and greater pharmaceutical regulation
Source: BFW (Bloomberg First Word)
Tickers
VXX US (iPATH S&P 500 VIX Short-Term Futures ETN)
IWM US (iShares Russell 2000 ETF)
XRT US (SPDR S&P Retail ETF)
SPY US (SPDR S&P500 ETF Trust)
People
Michael Hartnett (Bank of America Corp)
To de-activate this alert, click here
UUID: 7947283