CHART OF THE DAY: Contested Election = #Quad4 Allocation

09/30/20 08:42AM EDT

Below is a chart and brief excerpt from today's Early Look written by Director of Research Daryl Jones. 

As luck would have it, in our Q2 Themes presentation yesterday we outlined the asset allocation that should out-perform in a contested type scenario. This is based on what happened in Bush-Gore. I’ve included an outline of it in the chart of the day and, no surprise, it looks like a deep #Quad4 asset allocation – treasuries, low volatility, and gold outperform. On the other side of the ledger, risk assets – high beta, U.S. cyclicals, and growth- get beat like a rented mule.

And low and behold, we seem to be getting a #Quad4 morning. As Keith noted, in his Direct from KM note this morning:

  1. USD – biggest reason for going net short was the #1 correlation across most of macro right now (USD was signaling immediate-term TRADE #oversold yesterday) – it will be a #Quad4 morning, with the Dollar Up, as a result
  2. GOLD – its immediate-term TRADE (15-day) inverse correlation to USD = -0.98 so selling a lot of Gold on green was an easy risk management decision yesterday; I’ll look to buy that back at the low-end of Gold’s @Hedgeye Risk Range
  3. TECH (short) – first time I have shorted Tech (via Semis, SMH) since JAN-MAR was on green yesterday as Semis (SMH) were signaling a big lower-high and #NazVol started flying higher again. NASDAQ Volatility (VXN) of 35 and rising is not a chase-charts-buy signal!

Dollar is up and risk assets are down this morning, so far, as investors are clearly voting risk off following the “debate” last night.

CHART OF THE DAY: Contested Election = #Quad4 Allocation  - 63

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