Commodity Trading Advisors' Positions Pre-Elections

Investing.com reports that commodity trading advisors (CTAs) are primarily bullish on U.S. stocks, the dollar, and gold as the presidential elections approach, according to a note from Bank of America (BofA).

Current Positioning

BofA noted that while CTAs maintain elevated positions in U.S. equities, especially among trend followers, they are likely to turn into sellers this week after the S&P 500 experienced a sharp decline last week.

Gamma Metrics

The note highlights that gamma, which measures price changes in options relative to the underlying asset, is short on the S&P 500. This situation may worsen if equities continue to decline in the coming days.

Safe Haven Assets

CTAs have been notably active in purchasing the dollar and gold ahead of the U.S. presidential election, driven by high demand for safe havens amid a close race between Donald Trump and Kamala Harris.

Other Commodities

Regarding other commodities, BofA anticipates that trend followers will likely increase short positions on oil while decreasing long positions on copper.

Treasury Positions

The report mentions a predominant short positioning in Treasuries across the curve, indicated by recent increases in Treasury yields. BofA suggested that while long-term U.S. Treasury futures trends are bullish, many CTAs may have exited their long positions or moved to short positions.

Interest Rate Forecast

Treasury yields have surged recently due to expectations that the Federal Reserve will slow its interest rate cuts in the coming months. The central bank is expected to implement a 25 basis point cut this week following a 50 basis point reduction in September.

Dollar demand and speculation about a Trump victory have further bolstered yields, as Trump's policies are anticipated to be inflationary, potentially increasing interest rates in the years to come.