In less than a month, Americans will vote for one of the most influential presidents in U.S. history. But Wall Street is eerily quiet, with so-called “smart money” reluctant to bet on what’s about to happen.

“Never bet on a coin flip,” said George Ball, head of Houston investment firm Sanders Morris Harris. “The election is too close to make a thoughtful investment position.”

Rather than reducing their stock positions as they have done before previous elections, hedge funds have increased their exposure to stocks as the S&P 500 index continues to hit new highs, according to brokerage data from Goldman Sachs Group Inc. Options traders, meanwhile, are focusing more on the Federal Reserve's rate cuts and the state of the U.S. economy, putting the Nov. 5 vote on the back burner.

Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said, "Election concerns are behind a series of events such as the war in the Middle East, the rise and fall of U.S. economic data and the change in expectations of the Fed's rate cuts, and the upcoming earnings season."

Real Clear Politics' latest election poll average shows Democrat Harris at 49.2% nationally and Republican Trump at 47.2%. But because of the Electoral College, the national average is far less important than state polls, which inherently show a close race. The likelihood that either party will win the presidency and both chambers of Congress is considered low.

“First, the presidential race is very tight, especially in the swing states,” said Eric Sterner, chief investment officer at Apollon Wealth Management. “Second, both candidates have very ambitious economic goals, and I highly doubt either of them will be able to fully deliver on those campaign promises unless their party wins the White House, the Senate and the House.”

Jonathan Capplis, chief executive of hedge fund research firm PivotalPath, said hedge funds are taking a wait-and-see approach to the election, waiting for more clarity before making major politically-related investment bets. So far this year, that approach has paid off. U.S. long-short hedge funds have returned 11% through the end of September, ranking in the top 25% of median rolling returns over nine months since 2010, according to PivotalPath.

"Most funds are more likely to favor continued market growth rather than significantly reduce their holdings due to the still uncertain outcome of the U.S. election," Caplis said. "It is much easier to discern the impact of a Fed rate cut on an investment than vague statements from the Trump or Harris campaign."

Meanwhile, U.S. stock options volatility is relatively high compared to levels over the past year, suggesting traders are taking a defensive stance. But derivatives experts say there is little sign that this is primarily due to the election. Instead, options trading is driven by short-term catalysts such as the upcoming non-farm payrolls data, high volatility in Asian markets and geopolitical tensions.

That doesn’t mean election trading isn’t an option right now, of course. But portfolio managers and strategists are advising investors to focus on specific stocks and sectors rather than broad market indexes.

UBS’s trading desk recommended buying regional bank stocks, writing in a note to clients this week that the so-called “Trump trade” is making a comeback, with Republican administrations generally seen as favorable to heavily regulated industries such as finance and health care.

Energy is another popular election trade, with a Trump win seen as good for traditional energy producers and a Harris win seen as good for the clean energy industry.

Of course, there is another way, which is to be patient. Some professional investors suggest that anyone who plans to invest in the market for the long term should ignore the gossip, wait for the results to come out, and then make corresponding arrangements based on all the available information. Joseph Caplan, portfolio manager of Caplan Capital Management, said:

“While certain sectors may face greater headwinds and tailwinds under different administrations, there are good reasons to avoid large portfolio adjustments.”

Article forwarded from: Jinshi Data