Hedge funds are creating portfolios for a Trump presidential win, JPMorgan, $JPM, has said.
Global hedge funds are showing "a strong preference" for stocks that could thrive if Republican candidate Donald Trump wins the upcoming election, according to a note from JPMorgan. The bank analyzed hedge fund positioning ahead of the election, observing that "net flows year-to-date have been quite correlated to Trump's odds." It warned, however, that if Trump's chances decline, there could be "room for disappointment and reversal in the coming weeks."
In a Reuters/Ipsos poll released Tuesday, Democratic candidate Kamala Harris led Trump by a slim margin, 45% to 42%, with the gap remaining steady. Other national polls have shown the race tightening. Meanwhile, Trump has taken the lead in online prediction markets, holding a 60% chance of victory on Polymarket.
JPMorgan noted that portfolio managers have recently bought into themes that could benefit from a Republican-led government. Conversely, assets that would likely perform well under a Democratic administration, such as renewable energy stocks, have been sold off quickly as Trump's odds have improved. Trump has outlined an energy policy that contrasts with President Joe Biden’s clean energy agenda.
Hedge funds have also been buying into cryptocurrency stocks, although positioning remains neutral. Trump has expressed support for cryptocurrency and recently unveiled his own crypto venture, World Liberty Financial.
While JPMorgan didn't fully detail the components of its Republican and Democratic stock baskets, some hedge fund managers have been open about their strategies. Billionaire investor Daniel Loeb, for example, has adjusted Third Point's portfolio to capitalize on potential corporate activity if Trump wins, according to a letter seen by Reuters.
