Here’s how Aussie investors played the US market during election season
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The run-up to the US election every four years usually provides plenty of thrills and spills.
This year was no different, as market fluctuations culminated in a sharp selloff in the last week of October, before stocks rallied once polls closed.
How have Aussie investors have been trading the US market in that time? To get an update, Stockhead caught up this week with the team at Stake — the trading platform which offers exposure to US stocks and exchange traded funds (ETFs).
Speaking with Stockhead, Stake’s global head of marketing Bryan Wilmot said Stake traders had kept a close eye on key events leading up to the election.
One standout example is when Donald Trump tested positive for COVID-19 in early October.
At that point, traders turned bearish as the buy/sell ratio on the platform fell to 0.99 — a situation which “almost never” occurs, Wilmot said (a ratio above one means there are more buyers than sellers).
Stake users also showed a preference to use short-betting instruments to hedge their portfolio for unexpected events.
For example, upon news of Trump’s infection the ProShares Short QQQ exchange traded fund (ETF) became the fifth most-traded security on the Stake platform.
“It’s clear Stake traders have been keeping a watchful eye on the election lead-up, given how their trading behaviour has reflected the rollercoaster ride this campaign has been,” Wilmot said.
“Direct access to the market means they’ve been trading and reacting in real-time based on the developments,” he said.
And the presidential debate nights in particular were “fascinating”.
During the first debate on September 29, traders turned bullish as the buy/sell ratio shot higher, to $US4.81 bought for every dollar sold.
However, in the 24 hours following the debate it fell back to almost one. And the SQQQ ETF — which is “usually never in the top 10” — rose to become the ninth most traded security.
Aussie investors also demonstrated a pretty good sense of the US political pulse, as they gave Biden a 52/48 edge in a pre-election poll conducted by the platform.
However, more than two thirds (68 per cent) thought a Trump victory would be more bullish for markets.
Concurrently, 58 per cent of those surveyed thought a Biden win would see stocks fall.
Looking ahead, Wilmot provided some insights in sector positioning in the event of a Biden victory, given the Democrat candidate is now heavily tipped to win the election.
“If this happens, it could be that infrastructure, clean energy and telehealth will benefit,” he said.
“On the other hand, if Trump manages to secure four more years, banking, oil and defence are viewed as potential winners.”
Lastly, Wilmot added that Stake has another poll running while the votes are counted.
Interestingly, only one quarter (26 per cent) of Stake users surveyed think this election will result in an undisputed winner.
36 per cent predicted that recounts will be demanded in swing states, while another 36 per cent reckon Trump will take his battle all the way to the US Supreme Court.
“And if the result is unclear or contested, well — everyone will be watching the VIX (volatility index),” Wilmot said.