Trump feeds the bears
08 November 2016 New York
Image: Shutterstock
US presidential hopeful Donald Trump鈥檚 final dash in the polls on the eve of the election has inspired a significant surge in exchange-traded fund (ETF) shorting activity.
The latest S3 Blacklight data showed that, after months of market uncertainty, the potential for a Trump victory saw as much as $1.9 billion of new ETF shorting sales on 7 November.
Ihor Dusaniwsky, head of research at S3 Partners, explained in a research a note: 鈥淚f the last three month鈥檚 trend continues, tomorrow we should see a final bullish push if Hillary Clinton鈥檚 poll numbers surge overnight or a final bearish push if Donald Trump鈥檚 numbers grow.鈥�
In recent months, US polling has veered dramatically between the two main candidates as each was rocked by successive scandals. S3鈥檚 ETF tracker noted corresponding swings in short interest with periods of position building and covering reflecting the ebb and flow of Trump鈥檚 perceived chances of success.
With Trump鈥檚 momentum building traction from October, taking him to within a few percentage points of Hillary Clinton, ETF activity settled on a bearish stance in the final days of the election race.
Shorting activity in the three major index ETFs, the Spider S&P ETF, iShares Russell 2000 ETF and the Powershares Nasdaq Trust ETF, accounted for combined short sales worth $4.5 billion, with Spider S&P ETF claiming the lion鈥檚 share valued at $3.7 billion.
The trend mirrors the market鈥檚 behaviour in the lead up to the UK鈥檚 EU referendum, with a period of uncertainty and hedging giving way to a last minute surge in shorting activity in the pound and the UK鈥檚 housing market.
Dusaniwsk added: "The majority of the media and pundits have been reporting the election as a fait accompli for most of the process which may have had an effect on the election itself as it might have discouraged Brexit 'stay' voters and might discourage Clinton voters from casting their ballots because they thought that their vote would be unnecessary for their side to win."
"Second, as in the Brexit vote, the two choices can be characterised as popular versus unpopular. The British 'exit' vote was the unpopular vote and voters quietly pulled their levers but vocally said they were undecided, the same can be said for a Trump vote."
The latest S3 Blacklight data showed that, after months of market uncertainty, the potential for a Trump victory saw as much as $1.9 billion of new ETF shorting sales on 7 November.
Ihor Dusaniwsky, head of research at S3 Partners, explained in a research a note: 鈥淚f the last three month鈥檚 trend continues, tomorrow we should see a final bullish push if Hillary Clinton鈥檚 poll numbers surge overnight or a final bearish push if Donald Trump鈥檚 numbers grow.鈥�
In recent months, US polling has veered dramatically between the two main candidates as each was rocked by successive scandals. S3鈥檚 ETF tracker noted corresponding swings in short interest with periods of position building and covering reflecting the ebb and flow of Trump鈥檚 perceived chances of success.
With Trump鈥檚 momentum building traction from October, taking him to within a few percentage points of Hillary Clinton, ETF activity settled on a bearish stance in the final days of the election race.
Shorting activity in the three major index ETFs, the Spider S&P ETF, iShares Russell 2000 ETF and the Powershares Nasdaq Trust ETF, accounted for combined short sales worth $4.5 billion, with Spider S&P ETF claiming the lion鈥檚 share valued at $3.7 billion.
The trend mirrors the market鈥檚 behaviour in the lead up to the UK鈥檚 EU referendum, with a period of uncertainty and hedging giving way to a last minute surge in shorting activity in the pound and the UK鈥檚 housing market.
Dusaniwsk added: "The majority of the media and pundits have been reporting the election as a fait accompli for most of the process which may have had an effect on the election itself as it might have discouraged Brexit 'stay' voters and might discourage Clinton voters from casting their ballots because they thought that their vote would be unnecessary for their side to win."
"Second, as in the Brexit vote, the two choices can be characterised as popular versus unpopular. The British 'exit' vote was the unpopular vote and voters quietly pulled their levers but vocally said they were undecided, the same can be said for a Trump vote."
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