TOL - 15th Oct, 2024
20 stocks you should watch following the November 5 US Election
An insight into Plato Global Alpha's analysis on stock-specific implications of the 2024 US Presidential Election
This week, we released parts of our internal quantitative data that shows some of the Australian and global equities likely to be the biggest winners and biggest losers resulting from outcomes in the 2024 US Presidential Election.
The analysis, conducted by the Plato Global Alpha Fund investment team, is based on over 3 years of data pertaining to correlations between daily betting market movements and daily stock price movements of the largest 10,000 companies in developed markets.
For Livewire's ASX investors, I'll cut to the chase - three Australian stocks make the top 10 list of potential fallers in the case of a Donald Trump victory. While no Australian stocks make the top 10 list of potential gainers should Donald Tump win.
The data was compiled as part of our risk management process and is based on a uniquely objective approach.
There are various pundit predictions and expert insights on this topic. These crystal ball observations can be seductive, but often miss the mark.
Instead of relying on pundits, whose views are often tinted with red or blue, we have applied a more objective approach through the sort of analysis we regularly do as part of the Plato Global Alpha Fund investment process to avoid outsized losses.
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Betting market data
Global betting markets are constantly synthesising all available information, including real-time polling data, and bettors have a financial incentive to get it right. We think this analysis provides one of the most explicit, unbiased gauges of how stocks could react to either a Trump or Harris victory.
At the start of 2021, Kamala Harris was the frontrunner with a 20% probability of winning, while Donald Trump was seen as a long shot, with 20-to-1 odds.
However, Harris’s chances steadily declined, hitting a nadir in January of this year with just a 1% probability.
Fast forward to June 27 2024, Joe Biden’s disastrous debate performance led his win probability to drop to around 10%. Two weeks later, after Trump survived an assassination attempt, his odds skyrocketed to a record high of 70%.
The Democratic Party then made the decision to replace Biden. Since then, the race has been neck-and-neck, with Harris gaining an edge following an impressive debate performance on September 11.
While these twist and turns make for lively conversation, they rarely make profitable trades. The truth is no one really knows who is going to win this election. However, close analysis of market reactions to these moves provides some very valuable data for investors - data on potential companies overexposed to downside risk.
As active investors our core philosophy is not to predict shocks, but to ensure portfolios will not suffer excessive declines when shocks inevitably occur. So, we are continually considering scenarios that could impact stock markets – not predicting when or even if they’ll happen at all – and ensuring our client’s downside exposure to these events is limited.
The stocks to watch
The stocks in the table below have had the strongest negative price moves during instances when betting markets have recorded a 30% increase in the probability of a Trump presidential win.
Notably, several Australian gold companies are on the list. A Trump presidency, characterized by deregulation and tax cuts, could spur economic growth, creating a headwind for gold, traditionally a safe-haven asset. It’s also no surprise to see renewable energy companies on the list, given Trump’s well-known opposition to green energy.
The appearance of Warner Bros. Discovery can be attributed to its parent company owning CNN, a long-time Trump antagonist
Data is illustrative only. It should not be considered to be a recommendation to buy, hold, or sell any security.
The stocks in the next table have had the strongest positive price moves during instances when betting markets have recorded a 30% increase in the probability of a Trump presidential win.
Source: Plato Investment Management
Data is illustrative only. It should not be considered to be a recommendation to buy, hold, or sell any security.
U.S. deep cyclical energy companies and regional banks are likely to thrive under a Trump presidency, benefiting from reduced regulation and lower interest rates.
The inclusion of several semiconductor companies might be surprising, given Trump’s mixed stance on Taiwan and potential trade restrictions. However, these companies have a high “beta,” meaning they tend to outperform the market when it rises. If Trump’s policies boost market sentiment, semiconductor stocks could see substantial gains assuming he refrains from punitive trade restrictions.
The above lists can also be applied conversely in the result of a Harris win, however our internal analysis has shown some variance.
The Plato Global Alpha Fund
The Plato Global Alpha Fund, an all-weather long/short global equities strategy. Plato manages over $16 billion on behalf of large institutions, financial advisers and their clients, HNW investors, SMSFs, and retail investors.
More about the Fund's performance, portfolio and investment strategy: (VIEW LINK)
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David has more than two decades’ experience investing in global equities. Prior to joining Plato Investment Management he worked for JP Morgan Asset Management in London for fifteen years becoming one of the youngest managing directors in the firm’s history. He managed the JP Morgan Europe Equity Plus active-extension fund which was closed to new investors after growing to €6 billion, generating 4% p.a. net alpha over ten years. He also launched and managed the JP Morgan Europe Equity Absolute Alpha Market Neutral fund. In its first twelve months of operation, the fund returned over 20%, and grew assets to €1 bn. In 2014 he was the European Hedge Fund Manager of the Year (UCITS).
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This communication is prepared by Plato Investment Management Limited (‘Plato’) (ABN 77 120 730 136, AFSL 504616) as the investment manager of the Plato Global Net Zero Hedge Fund (ARSN 654 914 048) (‘the Fund’). Pinnacle Fund Services Limited (‘PFSL’) (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.
Link to the Product Disclosure Statement: https://plato.com.au/wp-content/uploads/Plato-Global-Net-Zero-Hedge-Fund-PDS.pdf
Link to the Target Market Determination: https://plato.com.au/wp-content/uploads/Plato-Global-Net-Zero-Hedge-Fund-TMD.pdf
For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com
This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.
Whilst Plato, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Plato, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication.
Any opinions and forecasts reflect the judgment and assumptions of Plato and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future.
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David has more than two decades’ experience investing in global equities. Prior to joining Plato Investment Management he worked for JP Morgan Asset Management in London for fifteen years becoming one of the youngest managing directors in the...
Expertise
David has more than two decades’ experience investing in global equities. Prior to joining Plato Investment Management he worked for JP Morgan Asset Management in London for fifteen years becoming one of the youngest managing directors in the...
Expertise
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