Long financials "makes sense" as Trump trade
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LONG FINANCIALS "MAKES SENSE" AS TRUMP TRADE
With UK and French elections now out of the way, the U.S. presidential elections in November are the next big event to focus on in a busy year for global politics.
Citi has looked at some Trump-related trades in stocks and other assets classes following the recent rise in chances for an administration under his leadership, even as there is still a lot of uncertainty to deal with.
"... Trump trades and timing aren’t obvious given limited clarity on fiscal policy, tariffs and the ongoing French election, alongside dovish Fed risks into the September FOMC," writes the U.S. investment bank in a note.
Citi says election years tend to be good for Wall Street and recommends positioning 2-3 months before election day. It also advises investors to go long U.S. financials, while tariff risks might hurt global stocks.
"We find US elections favour cyclicals over defensives, and the 2016 U.S. Trump election was no exception. With respect to global equities, we also think a Trump 2.0 presidency can be a headwind, given trade policy uncertainty," it says.
"In sector space, we think long financials vs equal weight SPX, or Russell 2000, or U.S. real estate could make sense. Globally, U.S. vs Europe or EM make sense for tariff risks."
(Danilo Masoni)
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