In the wake of Joe Biden’s withdrawal from the presidential race and Kamala Harris becoming the presumptive nominee, investors are strategizing their next moves. The stock market, particularly the Nasdaq 100, has experienced a significant development as it broke a trendline that has been in place since the April pullback. This shift is attributed to the belief that Harris will adopt a friendlier stance towards big tech compared to Biden.
The chart analysis reveals that the stock market is currently oversold, leading to increased buying activity from Harris supporters. However, it is important to note that The Arora Report remains politically agnostic, with their primary focus being to help members maximize profits while minimizing risk.
Based on rigorous analysis and hard data, The Arora Report has determined the following probabilities: the likelihood of Trump becoming the next president stands at 60%, a 5% decrease since Biden’s withdrawal. Assuming Harris becomes the Democratic nominee, the probability of her becoming the next president is estimated at 40%. The probability of a red sweep has fallen from 65% to 55%.
Investors are adjusting their positions accordingly, with bonds being bought due to the decreasing probability of a Trump election. The market perceives Trump’s policies as more inflationary compared to Harris’s. However, it is important to note that there is limited information available regarding Harris’s policies, although it is presumed she will continue with Biden’s agenda with some exceptions. These exceptions include being friendlier to big tech, adopting a more anti-oil and anti-gas stance, and potentially borrowing and spending more than Biden. Additionally, it is expected that Harris will be more bitcoin-friendly.
The market’s reaction to the changing political landscape is evident in various asset classes. The dollar has weakened slightly on expectations of increased borrowing under a Harris administration. Gold has experienced some selling pressure as a Harris presidency is perceived to be more predictable than Trump’s. Bitcoin, on the other hand, has seen a surge in value due to expectations of Trump being bitcoin-friendly, and it continues to hold its gains on the belief that Harris will also adopt a favorable stance towards the cryptocurrency.
In the early trading session, the Trump trade has paused, while the Harris trade is witnessing increased buying activity. The Arora Report advises investors to consider the Trump trade as the main trend and the Harris trade as a temporary counter-trend. This suggests buying the Trump trade on dips and selling or taking profits on rallies driven by the Harris trade.
Money flows in the early trade indicate positive activity in Apple Inc, Amazon.com Inc, Alphabet Inc, Meta Platforms Inc, Microsoft Corp, NVIDIA Corp, and Tesla Inc. Additionally, money flows are positive in SPDR S&P 500 ETF Trust and Invesco QQQ Trust Series 1.
Investors seeking an edge should monitor money flows in SPY and QQQ, as well as the buying activity of smart money in stocks, gold, oil, and bitcoin. Implementing a protection band strategy, which includes cash or Treasury bills, short-term tactical trades, and short to medium-term hedges, can help investors participate in market upside while mitigating risk.
For those adhering to a traditional 60% allocation to stocks and 40% to bonds, it is advisable to focus on high-quality bonds with a duration of five years or less. Alternatively, sophisticated investors may consider using bond ETFs as tactical positions rather than strategic ones.
The Arora Report has a track record of accurate calls, including predicting the big artificial intelligence rally, the new bull market of 2023, the bear market of 2022, stock market highs after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000, the start of a mega bull market in 2009, and the financial crash of 2008.