Less than half a month is left until the final day of the USA presidential election on November 5th. During this final sprint phase, the Republican presidential candidate Donald Trump's poll numbers are reversing, and his chances of winning are gradually increasing. According to the average betting market provided by the well-known political website Real Clear Politics, the probability of Trump winning has increased to as high as 59%, the highest level since July 22nd, far ahead of the 40% of his Democratic competitor Harris.

At the same time, the market heat for the 'Trump trade' is returning. A strategist from Bank of America pointed out that investors seem to be rushing to allocate to symbols that performed well after Trump's victory in 2016. What insights does this have for investors?

Trump's chances of winning have soared, and the capital markets are starting to 'buy as in 2016'?

The capital markets seem to be placing 'deposits' for Trump's return. Starting from the end of September, the US Dollar Index began to rise significantly, erasing the declines of the previous two months. This indicates that the market is pricing in expectations of a strengthening US dollar after Trump takes office.

Trump's economic policy proposals, including tax cuts, easing financial regulations, and increasing import tariffs, are seen as measures beneficial for enhancing the vigor of the US economy, which could potentially lead to higher inflation.

Bank of America strategist Michael Hartnett stated that due to the increasing likelihood of Trump winning the US presidential election and the Republican Party controlling Congress, investors have started to increase their shareholdings in the assets that performed the best after Trump's victory in 2016.

According to the latest market forecast for the US presidential election, the possibility of a 'Republican sweep' (i.e. Trump elected as president and Republicans taking both houses) has increased significantly from 20% at the beginning of the month to 33%.

In 2016, assets that benefited the most from the Republican Party's 'sweep' in the USA included regional banks, crude oil products, small-cap stocks, copper, industrial stocks, the S&P 500 index, and the US dollar.

Among them, the ETF tracking the performance of regional banks $Spdr Series Trust S&P Regional Bkg Etf (KRE.US)$ has risen by over 5% since the beginning of the month, representing small cap stocks ETF$iShares Russell 2000 ETF (IWM.US)$ is also close to a historical high, reflecting investors are following the darling of the crowd under the '2016 Trump trading'.

In addition, due to Trump's increasingly clear support for cryptocurrencies, cryptocurrencies have become one of the hottest 'Trump trades' this year. $Bitcoin (BTC.CC)$ Since early October, it has risen by nearly 13%, continuously gaining support from many major banks, and many Wall Street professionals are bullish on it rising to $0.12 million.

Additionally, directly linked to Donald Trump himself. $Trump Media & Technology (DJT.US)$ Having rebounded more than 140% from the lows, it also reflects an increasing bet on Trump from investors.

If Trump is elected, what are the similarities and differences between 2024 and 2016?

Institutions believe that the current hot 'Trump trade,' based on Trump's policies, political and economic environment, and current asset performance, is somewhat similar to the fourth quarter of 2016, albeit to a lesser extent.

Minsheng Securities pointed out that looking into the next year, besides the position of the president, it may be more important to consider the composition of the US government. From the current situation, apart from the president, the biggest uncertainty lies in the House of Representatives, with a high probability of the Senate returning to Republican control. Therefore, if Trump takes over the White House, there are two possibilities: Republican control of both houses, or a president (Republican) + Senate (Republican) + House of Representatives (Democrat).

The Republican Party's unified executive and legislative branches may have the smallest probability in recent years (10%), but it could be the most favorable scenario for the market. From a historical perspective, this situation is relatively friendly to risk assets and commodities. US stocks have returned as high as 24.3% during a presidential term, with impressive performances from gold, crude oil, and copper.

However, in a scenario where the executive and legislative branches under the Republican Party are divided, market risk aversion is strongest. During this presidential term, US Treasury bonds and gold perform the best, with US stocks showing weaker performance due to increased risks from tariffs and trade frictions.

From another perspective, at Ping An Securities, the new changes in the 'Trump Trade' show that US tech stocks are more resilient, energy stocks are weaker in performance, US Treasury rates are falling instead of rising, and gold shows stronger performance. The background includes escalating Middle East tensions, hurricane impacts on swing states, the prospect of a 'soft landing' for the US economy, and the Fed's path of interest rate cuts, all of which are some variables worth paying attention to in this election-related trading.

Of course, in specific industries, due to different policy proposals of the two parties, the related beneficiary symbols will also vary. Investors can still focus on allocating to Donald Trump concept stocks and Harris concept stocks.

Editor/new