SocGen suggests ways to trade US election

Societe Generale put out a note on Tuesday that summarised potential trades that clients could make to win whichever way the US election result went.

A Hillary Clinton win was the base scenario for SocGen but while a Donald Trump victory would be mostly ill-received by the markets, there were lots of ways for punters to share Tump's triumph.

SocGen echoed the wider market feeling that a Trump win would be likely to increase volatility and trigger a market sell-off, with a Clinton win expected to deliver a quick relief rebound in global equity markets and maybe even shoot the S&P 500 back into the 2,150-2,200 range.

Shorting the pharmaceuticals sector is a trade many are already participating in, in anticipation of the clampdown on pricing Clinton would be expected to try and enforce.

SocGen agreed global pharma would be a "clear loser" if Clinton wins, but SocGen's strategists also suggest Europe and Emerging Markets will outperform US equities, while within Asia Japan should underperform EM Asia due to a currency effect more favourable to EM equities.

The other side of that coin is that a Trump win would call for going long on pharma, while the risks of a more aggressive trade policy, also Europe, Japan and EM equities would underperform US equities.

If 'The Donald' became president, SocGen's strategists would favour low-beta equity markets such as China onshore stocks and ASEAN markets, though Korea and Taiwan "are vulnerable as US exports represent more than 5% of GDPs, and military alliances with Korea could be at risk".

Among currency trades, suggestions from the team included that a Clinton win would see the Japanese yen lose out against the Canadian dollar, while the Swiss franc would go the other way as it loses safe haven appeal.

"A Trump win would trigger increased uncertainty, and more volatility in our view," SocGen said, suggesting dollar weakness is likely to be temporary, but the big winners could be current account surplus country currencies "as global trade and investment flows contemplate the outlook".

As yen strength "is yesterday’s story", go long EUR/USD strategists thought, highlighting the heightened risk that European investor outflows would slow and European's ‘basic balance’ deficit would vanish.

Losers from a Trump win "could include big deficit economies that are reliant on global trade, such as the Canadian, Australian and NZ dollar. "On the other hand, the SEK is the weakest of the major current a/c surplus country currencies thanks to aggressive Riksbank policies", suggesting going short AUD/SEK could be a way to play that idea.