Before the US elections, CTAs are long stocks, the dollar, and gold—BofA

According to a recent BofA report, commodity trading advisors (CTAs) are adopting a bullish stance on U.S. stocks, the dollar, and gold as the upcoming presidential elections approach. However, their positioning in U.S. Treasuries has largely been short.

BofA observed that CTA positions in U.S. equities among trend-following investors remained robust, though it noted that these traders are expected to sell this week following significant losses in the S&P 500 last week.

Additionally, BofA highlighted that gamma—a metric indicating the rate of change in options relative to the underlying asset—was short on the S&P 500. This short gamma positioning could deepen if equities continue to decline in the coming days.

CTAs have been buying into the dollar and gold as the election nears, fueled by increased demand for safe-haven assets amidst a close race between Donald Trump and Kamala Harris.

As for other commodities, BofA indicated that trend followers are likely to raise short positions on oil while reducing long positions in copper.

Recent increases in Treasury yields reflect a primarily short position across the Treasury curve, according to BofA. “While we still believe that long-term U.S. Treasury futures trends are significantly more bullish than short-term trends, it is likely that most CTAs have exited their long positions or moved short,” BofA analysts commented.

Treasury yields have surged in recent weeks, spurred by expectations that the Federal Reserve will slow the pace of its rate cuts. The central bank is anticipated to cut rates by 25 basis points this week, following a 50-basis-point reduction in September.

Rising yields were also supported by dollar demand and speculation surrounding a potential Trump victory. Expectations that Trump’s policies could drive inflation may lead to higher interest rates in the future.

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.