Hedge Funds Favor Trump Stocks

By Carolina Mandl
NEW YORK (Reuters) – Global hedge funds have shown "a strong preference" for stocks that could perform well if Republican presidential candidate Donald Trump wins the upcoming election, according to JPMorgan in a recent note discussing positioning changes ahead of the nomination.

> "In general, net flows year-to-date have been quite correlated to Trump's odds," the bank stated, highlighting the potential for disappointment and reversal if those odds shift negatively in the coming weeks.

A Reuters/Ipsos poll released on Tuesday indicated that Democratic candidate Kamala Harris led Trump by a narrow margin of 45% to 42%, with the gap maintaining consistency. Some other national polls, however, have reflected a narrowing gap between the two candidates.

Trump has taken the lead in online prediction markets, with a 60% chance of winning according to Polymarket.

In the past few weeks, hedge fund portfolio managers have focused on assets presumed to benefit from a Republican administration, as noted by JPMorgan's positioning intelligence unit that monitors hedge fund portfolios.

Conversely, hedge funds have sold off assets likely to perform under a Democratic government. Notably, JPMorgan pointed to a rapid sell-off in renewable energy stocks coinciding with Trump’s increasing odds.

Trump’s energy policy platform is in direct opposition to President Joe Biden's clean energy agenda.

Despite a strong interest in crypto stocks, hedge fund positioning remains neutral. Trump has branded himself as pro-cryptocurrency and introduced a new venture, World Liberty Financial.

JPMorgan did not provide detailed components of its Republican and Democratic investment baskets and was unavailable for immediate comment. Some hedge funds, however, are making their trades known leaning toward a Trump victory. Billionaire investor Daniel Loeb has adjusted his firm Third Point’s portfolio to potentially take advantage of increased corporate activity should the Republican candidate secure the election, as noted in a letter viewed by Reuters.