'Unprecedented Concerns': How Investors Try to Protect Against the 2020 Elections - ForumDaily
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'Unprecedented Concerns': How Investors Try to Insure themselves from the 2020 Election Results

US stock investors are trying, through hedging (risk management), to insure themselves against the frightening prospect that could become a reality next year - and could be related to the outcome of the presidential election.

Фото: Depositphotos

According to Julian Emanuel, head of equities and derivatives at BTIG, the negative bet on the S&P 500 is at historic levels compared to the opposite bet in options markets. for higher prices, writes CNBC.

By this time next year will be a little over a month after the election.

“The price of lower rates versus higher rates is literally pricing in a post-election apocalypse,” Emanuel said. “We said that after the elections, either a less friendly attitude towards business or a civilizational conflict with China is predicted.”

On the subject: China made US concessions in trade war

Emanuel said it was unclear how investors would think about the elections at that time.

“The left, the right and the center are concerned about the extremely unstable outcome of the election,” Emanuel said.

Those who fear a less business-friendly environment may want to hedge their bets against a Democratic victory, such as Sen. Elizabeth Warren or Sen. Bernie Sanders. On the other hand, investors may fear that President Donald Trump's trade war with China will continue and worsen after the election.

Emanuel said that if hedging lasted for a month, it would not be so unusual.

“But when you value a one-year option, that kind of volatility matters a lot,” he said.

Emanuel calls this "unprecedented fear" from investors. He said the S&P 500 skew, which means how expensive cuts versus boosts are, is at the 99th percentile and historic.

On the subject: Impeachment: Democrats formally indict Trump

Emanuel and other analysts say investors are betting early in this presidential cycle, compared to other years. He said that the situation in various sectors is also changing ahead of the election. For example, change has begun in healthcare.

“You get paid to take risks. [Healthcare] is trading relatively cheap compared to the S&P 500 and its own price history, compared to 2016 when it entered the election season high and sold off all year,” he said.

Emanuel said he expects a 10% gain for the S&P 500 next year, with a target of 3450.

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