A final update on the Trump Trade: Tail-risk assessment

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here. 

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bullish (Last changed from “neutral” on 11-Oct-2024)*
• Trading model: Bullish (Last changed from “neutral” on 15-Oct-2024)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here. A Trump Trade updateJust ahead of the U.S. election, here is an update on the polls and the Trump trade. The polls show a very tight race. As a matter of perspective, here is a sensitivity analysis of what would happen if the polling errors were the same as they were in 2020 and 2022.
My view is that the election has been a referendum on Trump. Trump has always had a base support of about 40% of the electorate. Against that, the Democrats have their base and a coalition of never-Trumper Republicans. Opinions on both sides have been substantially dug in. What really matters in the end is the effectiveness of each side’s “get out the vote” efforts. As a reminder, each of following charts of Trump factors is designed so that a rising line denotes rising favourability for a Trump victory. 

• Trump Media & Technology Group: It’s a proxy for Trump enthusiasm as it’s the holding company for Truth Social, Trump’s social media vehicle.
• Domestic Revenue Stock ETF vs. S&P 500: One of Trump’s main platforms is to use tariffs to bring manufacturing back to the U.S.
• Inflation Expectations: Trump’s tariff policies are expected to be inflationary.
• Poland vs. Euro STOXX 50: Poland has been a surprise growth engine in the EU, but it neighbours Ukraine and the relative performance of its market is a measure of Ukrainian anxiety.
• Gasoline Price: Gasoline can be thought of as an anti-incumbent trade. Rising prices depress consumer sentiment and it’s negative for the incumbent.

Each has its idiosyncrasies. Even though Trump factors have taken a last-minute wobble, the general trend in the Trump trade has been up.
The full post can be found here.