Investors on Wall Street are increasing their investments in the U.S. dollar and government bonds, anticipating a potential victory for Republican presidential candidate Donald Trump. This comes as subtle shifts in the U.S. presidential race dynamics are detected, with just 14 days remaining until the election. A few weeks ago, these same investors were focused on areas that would benefit from a win by Democratic candidate Vice President Kamala Harris.
On Tuesday, The Wall Street Journal (WSJ) reported that major hedge funds and asset management firms on Wall Street are engaging in trades that would generate profits if Trump were to be elected.
While Harris leads in national polls, Trump is ahead in all seven swing states. Consequently, Wall Street is gradually increasing investments that could benefit from a Trump victory. For example, the stock price of GEO Group, a private prison operator, has surged 21% this month alone, reaching its highest level since 2022. Likewise, shares of Riot Platforms, a Bitcoin mining company, have jumped 34% this month, buoyed by Trump’s pro-Bitcoin policies.
Third Point, a hedge fund managing $11 billion, is purchasing stocks and futures options that would generate profits in the event of a Trump victory. RBC BlueBay Asset Management is adopting a similar investment strategy, anticipating a stronger dollar and rising U.S. Treasury yields should Trump be elected. Mark Dowding, Chief Investment Officer (CIO) of RBC BlueBay, which manages $130 billion in assets, stated that since late September, they have been focusing on and increasing trades related to Treasury yields and exchange rates tied to a potential Trump victory.
Themos Fiotakis, Global Head of FX Research at Barclays Investment Bank, suggests that the recent declines in the Chinese yuan and Mexican peso are tied to the heightened likelihood of a Trump win. He noted that it’s natural for the election to become a significant factor in the currency market.
Despite these trends, some Wall Street managers are maintaining a conservative approach. John Caplis, CEO of hedge fund research firm PivotalPath, noted that many hedge funds hesitate to make bold bets. He added that making large bets in uncertain situations is not suitable for hedge funds or investors.
