The U.S. presidential election and its aftermath promise investors big market swings in the second half of the year, says Goldman Sachs Group Inc.'s Scott Rubner.
The global markets division managing director and tactical specialist has been correctly bullish on U.S. stocks in May and June, but after July 17 he is modeling a correction in the stock market — this usually means about a 10% drop for equities.
"I would be looking to trim exposure up here post July 4th," Rubner wrote in a note to clients Friday.
August is historically a weak month for U.S. stocks as liquidity draws down ahead of the "back to school" quiet period. But this time around, a move lower could be exacerbated by the U.S. election.
Rubner predicts a "pre-election correction" where institutional investors will be forced to sell their winning long positions and hedge into the event.
Rubner's favorite election trade is an S&P 500 Index lookback put option — such a bet allows the holder to exercise a derivative at the most beneficial price of the underlying asset, over the life of the option.
