Wednesday, November 6, 2024

Wall Street’s Eyes Are On the Election, Its Money Not So Much

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(Bloomberg) — One trading session left. That’s all Wall Street has before Tuesday, when US voters begin the process of picking their next president and potentially determining the direction of the economy for the next four years.

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Traders are buzzing about the possibilities, constantly checking the latest polls and moves in election betting markets to divine who’s ahead, Republican Donald Trump or Democrat Kamala Harris, and what that means for their positions. In some corners, speculation is that Wall Street is betting on Trump. But when it comes to actually putting down money in the stock market based on that, things are quiet.

Investing pros know there’s a windfall to be made in calling the winner before it happens. Trouble is, this election is far too close for that, making the risk of a miss too high for many to stomach.

“We are not positioning for an outcome in the election because it is a coin flip,” Eric Diton, president and managing director of the Wealth Alliance, said in an interview. “It does not make sense to make a bet.”

Most traders see volatility coming this week, possibly lots of it with the strong likelihood of a disputed result dragging the vote count out for weeks or even months. This explains why the Cboe Volatility Index climbed above 20 in its last four sessions, a level that typically signals rising stock market stress. And it’s why investors are less eager to pick winners and losers based on who they think will be America’s next president.

“Polls have been so wrong in the past,” said Dave Lutz, equity sales trader and macro strategist at JonesTrading. “There is just no edge to see who is winning.”

Safety In Cash

The other positioning challenge is the number of additional catalysts surrounding the vote that are likely to move the market. Election Day will quickly be followed on Thursday by the Federal Reserve’s interest-rate decision and Fed Chair Jerome Powell’s press conference, where he’ll give details on the central bank’s interest-rate path. And a big chunk of US corporations are still due to report their earnings, with chip giant Nvidia Corp.’s results expected on Nov. 20.

This explains why Lutz isn’t specifically positioning for the election. What he recommends instead is “sitting on some cash” that can be deployed when any short-term opportunities open up, like individual stocks or sectors having knee-jerk reactions as a winner emerges.

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