Election Week

Election season is here and markets do not like the uncertainty that comes with it. Dow posted worst one-week sell off since March, fueled by Germany and France lockdowns, withdrawal of guidance from major technology companies, and political uncertainty. The Volatility Index (VIX) is sitting at 38.02 and reached as high as 41 on Friday, signifying investors are uncertain about the markets next move, likely down until result is solidified. In most instances, a surging VIX and plummeting stock prices may present a unique buying opportunity. However, in this case, I disagree and would wait until we have an election outcome. 

Gameplan

If you still have your portfolio, you should have or should be adding hedges in case of a heavier sell off. I am net short, as I do not believe the market will digest the uncertainty well, given the election will likely not be decided on 11/3. I have positions in the following to hedge my portfolio to be insulated from any big losses: SWBI, SRTY, SH. If you believe you want more protection in the event Biden wins, you may want to short Lockheed Martin, or similar defense names.

Regardless, of political position, I believe hedging is the most astute thing to do, as this election is likely to have some contention or controversy (refusal to accept results on either side, recount or voting error). Today, Bank of America predicted the market can fall 20% if the election is not decided on 11/3. Some energy names to buy as hedge would be CSIQ and TAN, as they both would go higher if Democrats win. 

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