|

US Election: Taking a defensive stance in the portfolio makes sense, risk to the downside

  • How would you diversify an investment portfolio through the following asset classes ahead of the Election?

The market is pricing in a Clinton victory, but there is still plenty of time for things to change.  If they do the markets will react to the proposed uncertainty of a Trump presidency in a violent manner.  Accordingly, I believe it makes sense to take a defensive stance in an investment portfolio. After all, if a Clinton victory is expected and priced in the upside in equities is likely limited and the risk will be to the downside.  T

               US Dollar – 0%

               Commodities – 20% (with gold receiving the largest allocation)

               Equities – 55%

               Bonds – 25%

  • Do you foresee any trading opportunities ahead of the Election? Which ones?

I believe we will see a stark increase in volatility as we head into the election and in its aftermath.  As is the case with most large events, the best course of action is to keep speculation mitigated ahead of the event to keep capital available to take advantage of potential anomaly pricing once the market has reacted. For instance, those who went long the S&P on the heels of the Brexit collapse likely fared well. Similarly, buying the British Pound into its collapse was initially a good trade. In short, traders should keep plenty of fire power available; any large fallout in the equity market or the US dollar could provide favorable opportunities for the bulls.

Author

Carley Garner

Carley Garner

DeCarley Trading

Carley Garner is an experienced commodity broker with DeCarley Trading, a division of Zaner, in Las Vegas, Nevada. She is also the author of multiple books including, “Higher Probability Commodity Trading” and “A Trader's First Book on Commodities”.

More from Carley Garner
Share:

Editor's Picks

AUD/USD pulls back from monthly high but holds above 0.7000

AUD/USD retreats from the monthly high set earlier this Thursday, sliding back to 0.7000 during the Asian session as a further escalation of tensions in the Middle East undermines the risk-sensitive Aussie. However, recent hawkish comments from RBA officials could support the Australian Dollar. Furthermore, the prevailing US Dollar selling bias, despite Fed hike bets and geopolitical uncertainties, could limit losses for the pair.

USD/JPY declines to a one-week low; eyes trading range support near 157.50 on weaker USD

USD/JPY drops to a one-week low during Thursday’s Asian session, with bears now awaiting a break below multi-week range support near mid-157.00s before placing fresh bets amid a broadly weaker US Dollar. Despite bets for a December Fed rate hike and Middle East jitters, the recent decline in US bond yields keeps USD depressed near a three-week low. Moreover, hawkish BoJ expectations and intervention risks underpin the Japanese Yen, further weighing on the currency pair.

Gold bounces off monthly low as USD selling remains unabated amid falling bond yields

Gold pares heavy intraday losses to the monthly trough, though it retains an intraday bearish tone below $4,100 during Thursday’s early European session. The US Dollar selling bias remains unabated as Federal Reserve officials recently signaled there is no urgency to raise interest rates at the upcoming October 27–28 meeting. Furthermore, US bond yields extend their retracement slide from multi-year highs, keeping USD bulls on the back foot and offering some support to the precious metal.

Dogecoin stays weak despite whales and new deal

Dogecoin price remains under pressure, trading below $0.081 despite a modest rebound earlier this week. Santiment data shows signs of accumulation, and Wednesday’s announcement of a Dogecoin Labs partnership with the Dogecoin Foundation adds a mildly bullish sentiment. Meanwhile, mixed derivatives metrics and weakening momentum indicators continue to limit the meme coin recovery.

Dow Jones Industrial Average climbs with the AI trade, led by a bank

The Dow Jones Industrial Average got most of its share of Wednesday's artificial intelligence (AI) rally from a bank and a bulldozer maker. The index closed near 52,800, its highest close since early September. SpaceX (SPCX) reported 161% revenue growth and the Nasdaq Composite rose more than 1%, but under price weighting the gains that counted most belonged to Goldman Sachs (GS) and Caterpillar (CAT).

The US Dollar fell. Gold didn't rally. That tells you everything
Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.