Daily Brief - Trump makes the market go .. up

TLDR: The market rallies when Trump’s odds go up. How do you trade this? Short on Election Day.

Have you seen the recent polls? Donald is crushing it.

Not only did we notice that his odds are almost 60% win vs 40% Kamala. We also spotted a very interesting correlation between Trump’s odds and the S&P 500: It appears that when Trump is rising, so is the market. One might wonder why?

The last time we had a Trump win, the market went on a rampage. After all a Republican pro-business government is definitely good for the stock market. But why is the market rallying now?

We can certainly imagine a Trump administration to prop the market: less taxes, more government spending, less regulation. But what about tariffs and geopolitical tensions? Well, the market does not really care. We already have 2 serious local conflicts on the border of Europe, yet the market is at its peak.

Nevertheless, beware of a “sell the news” effect if Trump gains on Nov 5th.

How to trade it

For allocators, this changes nothing. Do not trade politics, stick to your guns and focus on allocation - in particular, beware of equities at 22x P/E.

For traders, this is an interesting time. The most obvious trade around the corner is to expect profit-taking and volatility after the election with a negative bias - if Donald wins, sell the news; if Kamala wins, sell the surprise.

Market Movers: SPX reaction to a Republican president

Earnings Spotlight: Netflix reports tonight

Netflix (NFLX) is set to report its Q3 2024 earnings today, with significant attention on subscriber trends and future growth.

In Q2, the company added 8.05 million global paid subscribers, surpassing its forecast and driving a 1% revenue increase. However, Netflix has cautioned that Q3 subscriber growth may fall short of last year, as the initial impact of paid sharing fades. Analysts expect 4.47 million new subscribers for Q3, with revenue projected at $9.78 billion.

The company faces mixed Wall Street opinions, with Piper Sandler upgrading Netflix on its dominance, while Barclays downgraded it, citing growth challenges. Key areas to watch include the impact of its ad-supported tier, potential price hikes, and competition in the streaming market.