We’ve received loads of feedback from our clients regarding our Trump versus Biden basket. 

As a result, we will provide a detailed breakdown of both baskets and explain the rationale behind each. We are updating the baskets regularly based on the political proposals of the two candidates. Based on the year-to-date performance of the Trump basket, it’s evident that the market has been anticipating a Trump victory for some time now.

Looking at rolling betas for the Trump and Biden baskets we find that the Biden basket is the more inflation sensitive of the two, which makes sense given its tilt towards rates sensitive sectors. It is also notable how the Biden basket has a beta to SPX of around 1.1 while delivering negative returns compared to SPX underlining the sector specific risk factors that the Biden basket is exposed to. The Trump basket, on the other hand, is your friend when it comes to inflation protection with a positive coefficient to short term inflation expectations. Although the Trump basket is tilted towards inflation, there is a tail risk that US energy will underperform post election if Trump makes his way to Saudi Arabia and gets a deal with MBS, which will likely be supply friendly.  

Chart 1.a: The Trump Basket has been on a heater the last few days!  

Chart 1.b: The Trump and Biden Baskets’ rolling beta to SPX

Chart 1.c: The Trump basket is your inflation protection friend