Global hedge funds are showing a notable preference for stocks likely to benefit from a potential win by Republican US presidential candidate Donald Trump, according to a report by Reuters citing recent analysis by JPMorgan.
An investor note from the bank has highlighted how hedge fund positioning is shifting as the US presidential race heats up.
“Net flows year-to-date have been closely aligned with Trump’s odds of winning,” JPMorgan stated, adding that there could be some reversal if Trump’s chances begin to diminish in the coming weeks.
A Reuters/Ipsos poll last week showed Democratic candidate Kamala Harris leading Trump by a slim margin, 45% to 42%, with little change in their standings. However, prediction markets, such as Polymarket, currently give Trump a 60% chance of securing the presidency.
In recent weeks, hedge fund managers have been increasing their exposure to sectors and themes that could flourish under a Republican-led government, according to JPMorgan’s positioning intelligence unit, which tracks hedge fund portfolios. Simultaneously, hedge funds have been offloading assets that are viewed as favourable to a Democratic administration. One key example cited is renewable energy, which has seen rapid selling in recent weeks as Trump’s chances have surged.
Trump’s energy policy contrasts sharply with current President Joe Biden’s focus on clean energy. The Republican candidate advocates for a more traditional energy platform, which could explain hedge funds’ pivot away from renewables.
Hedge funds have also been bullish on crypto-related stocks, though overall positioning remains neutral. Trump has expressed support for cryptocurrency and recently announced the launch of his own crypto-focused venture, World Liberty Financial.
Some prominent hedge funds have been more transparent about their Trump-leaning strategies. Billionaire investor Daniel Loeb, for instance, has adjusted his fund, Third Point, to capture the potential surge in corporate activity that may follow a Trump victory, according to a letter reviewed by Reuters.
