Investors Pay Attention To Major Macro Arora Call After Trump Assassination Attempt, Whales Buying
To gain an edge, this is what you need to know today.
Major Macro Arora Call
Please click here for an enlarged chart of 20+ year iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT).
Note the following:
- The chart shows that long bonds fell on Trump’s win in the Supreme Court immunity decision.
- The chart shows that long bonds ran up after falling on the Trump immunity decision. The reason for the run up has been two fold.
- Weak economic data. For details, click here to see prior articles.
- Wall Street almost unanimously calling for investors to extend fixed income duration, leading to investors rushing to buy longer term bonds.
- The chart shows that long bonds are dropping after the assassination attempt on Trump.
- It is worth a reminder that The Arora Report is politically agnostic. We are neither for Trump nor Biden. Our sole job is to stay objective and help investors extract the maximum money out of the markets.
- It is also worth a reminder that investors should separate their politics from investing. For more on this subject, see prior writings from The Arora Report.
- We previously shared with you that the highest probability scenario was Trump winning the Presidency. In The Arora Report analysis, after the assassination attempt, the probability of Trump winning the presidency has gone up significantly.
- Over a long period of time, The Arora Report has made numerous important macro calls that went against Wall Street consensus. The record of The Arora Report's major macro calls is well documented, and to date, they have been 100% correct.
- After the assassination attempt on Trump, there is a new Arora major macro call – reduce the duration of fixed income in your portfolio. This call is contrary to Wall Street’s consensus of increasing portfolio duration.
- The maximum duration in a 60/40 portfolio of bonds is being reduced from seven years to five years. Please scroll down to the “Traditional 60/40 Portfolio” section below for more details.
- We have been sharing with you in the capsules and other posts the changes that are being made now and are likely to be made in the coming months based on the highest probability scenario of Trump being elected as the next president.
- Investors have a difficult task ahead to make proper shifts in their portfolios in a timely manner. The task becomes more difficult because most of the information in the media is either provided through a political lens or there is another agenda that is not in your best interest. The Arora Report is a rare resource for investors seeking completely objective and highly analytical analysis.
- For investors, the main theme to remember is that Trump’s agenda is inflationary for the economy, but also has the potential to let loose entrepreneurial spirits.
- A Trump presidency will be positive for AI stocks, with the exception of those heavily exposed to China. A Trump presidency will also be positive for companies engaged in mergers and acquisitions.
- A Trump presidency will be negative for heavily indebted companies. A Trump presidency will also be negative for Chinese stocks, Mexican stocks, and renewable energy stocks.
China
Significant economic data has just been released in China. The most important is Q2 GDP. It came at 0.7% quarter-over-quarter vs. 1.1% consensus. Slowing growth is an impediment to China’s ambition of replacing the U.S. as the world’s number one superpower.
Magnificent Seven Money Flows
In the early trade, money flows are positive in Apple Inc (NASDAQ:AAPL), NVIDIA Corp (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA).
In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc (NASDAQ:META), and Microsoft Corp (NASDAQ:MSFT).
In the early trade, money flows are negative in Alphabet Inc Class C (NASDAQ:GOOG).
In the early trade, money flows are positive in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).
Momo Crowd And Smart Money In Stocks
Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD). The most popular ETF for silver is iShares Silver Trust (NYSE:SLV). The most popular ETF for oil is United States Oil ETF (NYSE:USO).
Bitcoin
Bitcoin (CRYPTO: BTC) is seeing aggressive buying in the wake of the assassination attempt on Trump. Trump is pro-crypto. The higher probability of Trump becoming the next president appears to be behind whales aggressively buying bitcoin. However, investors need to be careful as whales tend to run up bitcoin, getting retail investors excited. Then, whales unload bitcoin to unsuspecting retail investors.
Protection Band And What To Do Now
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
Traditional 60/40 Portfolio
Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
