Does anyone have any predictions of how the US mid-term elections will go and what potential impacts they will have on markets and sectors??
Mine are,
1. Republicans win House and Senate
- Markets will see a boast temporarily
- Gold will fall
- IMO markets will rally (2-5 days) if Republicans win but will eventually stall once investors realise that the US-Sino trade war will probably not be resolved in a way that is favourable for markets.
- Gold will have an initial sell off maybe $1,200-1,210 level but will start to rebound when markets start to stall and become nervous from the Trump uncertainty again.
Trump will feel his strongest now so will more than likely not compromise on his end of the trade tariffs.
As for his recent comments suggesting a "Great deal is close with China"
I believe this comment was just an attempt to get more voters on side pre elections but holds no truth.
I don't believe he is going to back off from his hardline stance with China, especially if Republicans win both House and Senate.
2. Democrats win House and Republicans hold senate (Currently most likely scenario)
- Markets will initially see a sell off
- Gold will rally
- IMO markets will fall over 1 to 2 sessions to the recent lows but will probably bounce from there.
Investors will realise that although congress may be grid-locked, Trump may be more willing to make a trade tariff deal with China that suits both parties which will be a major positive for the markets.
- Gold will likely rally and probably rise above recent highs $1,240+
3. Democrats win House and Senate (Currently least likely scenario)
- Markets will sell off hard.
- Gold should rally hard
- IMO this outcome would be the worst for markets and we would probably see a major sell off (1-3 weeks, 20% correction).
I think a push past recent lows to February lows is likely.
- Gold will rally the hardest with the uncertainty and could see a push up near $1,300 over the course of a week.
So how to trade through this?
1. All Cash (For the conservative)
Pros - The safest and the best choice for buy the dip trader/investors.
Cons - potentially miss out on big initial gains if Republicans win.
2. Go long Equities (For the bravest)
Pros - Could see a massive bounce
Cons - Could see a massive loss...
3. Mix of Equities, Gold and Cash (For the trader)
- Probably the best choice with more emphasis on cash for the conservative as 2 out of 3 possibilities will likely see a sell off in equities.
- Holding 1 or 2 Gold stocks for a hedge is probably wise as 2 out of 3 possibilities will likely see a rise in the price of Gold.
- May be wise to reduce capital in equities especially stocks that have ran very hard off the recent bounce as the upside will likely be limited from here.
@sharks37 you may be able to add some thoughts on FX?
(20min delay)