Strategic Round Up with Linda

Good morning, Investors!

As we dive into election week, it’s no secret the markets are grappling with heightened uncertainty, sector rotations, and mixed narratives. With the U.S. presidential election just days away, our focus this week centers on the election’s immediate and long-term implications for markets and key sectors.

In today’s round up you will find a breakdown of the 8 big themes and a tactical playbook to navigate the week ahead.

Additionally, Linda created a chart that visualizes the expected gain versus risk for each idea highlighted. Each point represents a different strategy with its relative risk level and expected gain percentage, making it easier for readers to see the risk-return profile of each tactic you’re discussing. This can help investors quickly assess where strategies like Bitcoin, Clean Energy, and Healthcare fall on the spectrum of risk versus potential return during election week. ​​

1. Staying the Course with Bitcoin

Bitcoin remains our steadfast choice as the digital asset to weather election-driven volatility. Historically, BTC has rallied post-election, regardless of party outcomes, serving as a hedge against political and economic uncertainties. As election results unfold, volatility may create potential buying opportunities on dips. Bitcoin’s appeal as an alternative to traditional assets has never been stronger, and maintaining our long BTC position allows us to leverage this resilience.

Strategy: Hold core BTC positions and look for buy-the-dip opportunities if election news causes a temporary selloff. Trailing stops on additional BTC purchases will help lock in gains as BTC rises.

2. Capitalizing on the “Betting Economy” Boom

The rise of platforms like Robinhood has made futures, options, and event-driven bets accessible to retail traders, fueling a new wave of engagement. This trend shows no signs of slowing, especially as Robinhood introduces new features for betting on sports and events, appealing to the "Betting" trader mindset. DraftKings and Coinbase are also primed to benefit from this environment as post-election trading intensifies.

Strategy:

• Robinhood (HOOD): A long position here captures post-election retail interest.

• DraftKings (DKNG) and Coinbase (COIN): Consider short-term call options on these names to capture volatility-driven activity.

3. Outcome-Driven Sector Rotations

The election outcome could spark a sharp rotation across sectors, with distinct implications for our positioning:

• If Trump Wins: We expect small caps and financials to rally, benefiting from regulatory relief. Tech giants like Google and Amazon, facing anti-trust scrutiny, may also see a boost as market fears around regulation subside.

o Strategy: Consider adding exposure to small caps, financials, and key tech players through direct positions or options.

• If Harris Wins: Anticipate an initial market dip, given concerns over corporate tax policies. Clean energy should benefit significantly under a Harris administration, with names like First Solar well-positioned to gain.

o Strategy: Watch for pullbacks to add to positions in high-growth stocks and clean energy ETFs, capitalizing on a pro-renewables administration.

4. 10-Year Treasury Yields: Playing the Waiting Game

The 10-year yield is on the rise, creating competition for equities. This favors value sectors over growth and pressures interest-sensitive sectors like homebuilders and REITs.

Strategy:

• Underweight REITs and Utilities: The rising yield environment weighs heavily on these sectors. Trim positions accordingly.

• Rotating to Value: Allocate toward value, particularly international markets like Brazil and Mexico, which are showing signs of bottoming. Keep an eye on Brazil’s EWZ and Mexico’s EWW as potential buys.

5. AI & Semiconductors: Seasonal Tailwinds

As we enter November, AI and semiconductor stocks are positioned for seasonal strength. The demand for AI infrastructure is only accelerating, and semis are well-poised for a potential bounce.

Strategy: Look to accumulate Nvidia (NVDA) and semiconductor ETFs (e.g., SMH) on any weakness. November has historically been a strong month for this sector, which could offer short-term gains as election uncertainty recedes.

6. Healthcare: A Defensive Play with Upside Potential

Healthcare stocks are in a unique position, having sold off recently yet poised for growth as spending remains robust. With election-driven volatility on the horizon, healthcare offers defensive characteristics alongside solid growth potential.

Strategy:

• Buy the Dip in Healthcare: Names like DaVita (DVA), Cigna (CI), Tenet (THC), and Merck (MRK) offer attractive valuations and solid fundamentals. Place limit orders or options spreads to capture potential re-tests of 200-day moving averages.

7. Short-Term Tactical Moves: Playing the Volatility

Election uncertainty always stirs volatility, and this year is no different. The elevated VIX offers protection while capturing short-term reactions to any surprises.

Strategy:

• Hedge with Volatility: VIX ETFs or options provide a buffer against swings in response to unforeseen election dynamics.

• Early Voting Insights: Monitor demographic turnout patterns; for instance, higher female turnout might suggest Harris gains, favoring a rotation to clean energy and defensive plays.

8. Keeping Cash Reserves and Reducing Risk

Given the binary risk environment, it’s prudent to hold some cash to capitalize on any post-election volatility or potential buying opportunities. Avoid overcommitting until clarity returns post-election.

Strategy:

• Cash on the Sidelines: Allocate a portion of your portfolio to cash, keeping flexibility to capitalize on post-election opportunities.

• Trailing Stops: Protect profits on high-beta and speculative positions.

Big Picture

Expect election week to reveal or accelerate certain sector rotations that reflect the market’s assessment of policy, growth, and regulatory shifts. Our core positions in Bitcoin, healthcare, and select “Betting economy” stocks like Robinhood and DraftKings are primed to perform in this environment, but we’ll be tactical in our allocations based on early election outcomes.

As always, keep disciplined with stops, follow the rotation trends closely, and remember—sometimes the best trade is the one you don’t take. Let the election play out, react to market signals, and stay flexible for the opportunities ahead.

Best,

Linda AGI