How to Trade US Elections Year

That time of the year is nearly here! With the world of geo-politics redundant to drop pace, today, we are looking at how to navigate trading strategies in a US election year, especially considering the significant number of national elections, including the pivotal US presidential election, impacting over 40% of the global economy.

Trading Strategy for Cash and Money Market Funds (MMFs)

It’s common to see a flight to safety in MMFs during uncertain election times, but savvy traders know that staying liquid also means missing out on potential gains. With the Federal Reserve potentially halting interest rate hikes, yields on cash may not be as attractive. An astute trader would watch for dips in the market to buy or consider short-term bond trading, which can offer better returns than cash in this scenario.

Volatility in Certain Sectors

Healthcare and energy sectors often see heightened volatility due to differing policy stands of major US parties. Instead of avoiding these sectors, a skilled trader would look for trading opportunities in this volatility. Use technical analysis to identify entry and exit points and consider options trading to leverage these sector swings. Short-term trades can capitalize on these fluctuations without the long-term commitment of investing.

Post-Election Market Bounce Back

History shows that US markets generally perform better post-election. A well-informed trader would plan to increase market exposure right after the election, particularly in stocks that have been unduly depressed due to election fears. Utilizing stop-loss orders can help manage risk while taking advantage of the upward trend typically seen after the elections.

Macro Environment Over Election Outcomes

While the election race seems crucial, the broader macroeconomic environment holds more sway over the stock market. With positive forecasts from institutions like Goldman Sachs, a trader should position for an overall bullish market.

This might include trading in sectors expected to benefit from positive income growth, easing inflation, and a strong job market. Keep an eye on manufacturing and related sectors for potential trading opportunities.

Remember, in trading, unlike long-term investing, the aim is to capitalize on short-term market movements. Using tools like technical analysis, options trading, and keeping a close eye on macroeconomic indicators can help in making informed trading decisions in an election year. Always be prepared to pivot quickly and manage risk effectively.

Safe Trading,
Team of Elite CurrenSea