The election is no time for portfolio heroics - or is it?
Main U.S. indexes green; Nasdaq out front, up ~1.2%
All 11 S&P 500 sectors positive; Cons Disc leads
Euro STOXX 600 index up 0.1%
Dollar down; gold ~flat; crude up ~1.5%; bitcoin up ~4.5%
U.S. 10-Year Treasury yield rises to ~4.36%
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THE ELECTION IS NO TIME FOR PORTFOLIO HEROICS - OR IS IT?
Investors have a couple ways to play the U.S. election trade - they can protect portfolios from volatility and hold off on big bets until the policy implications are clear.
On the other hand, some volatility might be just what the doctor ordered for investors bullish on the market's growth but looking for cheaper entry points.
Broadly, investors have been moving to a more neutral stance ahead of the election and have fled equities over the past week.
"Few (are) seeking to risk their year-to-date profit and loss over what is an incredibly finely balanced election, as risk management has become the priority, and should remain so," Michael Brown, senior research strategist at Pepperstone.
With the stock market rallying as much as it has this year, you could be forgiven for not wanting to risk existing gains - the S&P 500 .SPX is up nearly 21% and the Nasdaq .IXIC 22.5%, while the Information Technology index .SPLRCT alone has soared over 30% year-to-date.
"We don’t think that you’re paid to be a hero right now, meaning that the valuations we see in the market are not necessarily compensating for the near-term risks that we see," said Brian Burrell, portfolio manager at Thornburg Investment Management.
The S&P 500 is trading at around 21.5 times forward earnings, versus its long term average of 16 as per LSEG data.
Here's the other side of that argument:
With the economy strong, Fed cuts on the horizon and steady earnings growth, the backdrop for equities is strong, no matter who takes the White House.
"Taking chips off of the table ahead of the election will only make it more difficult to move back into stocks once the uncertainty fades," says James Demmert, chief investment officer, Main Street Research.
Demmert says investors should "buy the chop," anticipating a so-called "Santa Claus rally" and the S&P 500 closing at 6,150 by year-end.
Similarly, Ken Mahoney, CEO of Mahoney Asset Management, recommends making "volatility your friend."
"Put some bids below the market on your favorite stocks, like some of the market leaders in the large-cap space, this could be anywhere 5-7% below the market in case we get a large and probably irrational selloff."
(Lisa Mattackal)
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FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:
TUESDAY DATA DISTRACTION: SERVICES PMI ACCELERATES, TRADE GAP GAPES - CLICK HERE
WILL IT BE RED OR BLUE? ACTUALLY, IT'S ALL GREEN EARLY ON ELECTION DAY - CLICK HERE
S&P 500 INDEX: VOTING WITH ITS FEET? - CLICK HERE
U.S. ELECTION AND ITS IMPACT ON THE FED'S STEPS - CLICK HERE
IS BULLISH POSITIONING A RISK, GOING INTO US VOTE? - CLICK HERE
WHY EURO AREA INFLATION COULD STAY BELOW 2% FOR LONG - CLICK HERE
STOCKS HOLD THEIR BREATH AS AMERICA VOTES - CLICK HERE
EUROPEAN FUTURES STEADY AS ELECTION DAY ARRIVES - CLICK HERE
MARKETS BUCKLE UP FOR ELECTION DAY - CLICK HERE
Fund flows: U.S. domiciled equities, bonds and money market funds https://tmsnrt.rs/3KNM61M
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