Assessments / Blog
US ELECTIONS MAY TRIGGER MAJOR MARKET BOTTOM – PART II
Keeping in mind the information we presented in Part 1 of this research, our hypothesis is that US elections cycles present a huge opportunity for skilled traders by creating volatility and rotation in price and many segments of the global markets. Over the past 3+ years, we have been writing about what we call a “capital shift” that has been taking place. Near the end of the Obama presidency (2015 & 2016), a number of factors were taking place in the US and global economy. First, the start of the new Presidential Election cycle events was already working through the news cycles – the selection of the candidates. Second, China had recently instilled capital controls to prevent a capital outflow issue and to support their bulging economy locally. Lastly, emerging markets and oil had collapsed, putting incredible pressures on certain foreign markets to support their local economies and find suitable sources for their investments as currencies started to collapse as well.
This event, that actually started in 2014 or so, initiated what we call the “capital shift” where cash quickly moved out of risky investments and hunted for and deployed within safer investment structures – the US and major global equity markets. In particular, we believe the US Technology, healthcare and biotech sectors were huge beneficiaries of these new capital investments and we believe as these share prices started increasing, more and more capital kept flowing into these sectors – like a dog chasing his tail. The price advances seem to never end… until the 2016 election cycle event. This caused the entire global equities markets to pause for a few months as Hillary Clinton and Donald Trump battled it out.
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