Investors Pay Attention: Your Wealth, Apple, Tesla, And Nvidia May Be Impacted By Trump Immunity

To gain an edge, this is what you need to know today.

Trump Immunity

Please click here for an enlarged chart of iShares 20+ Year Treasury Bond ETF TLT.

Note the following:

• The chart shows that bonds fell yesterday. Falling bonds mean rising yields.
• The chart shows that the recent breakout above the resistance zone failed.
• The chart shows that bonds are now approaching the top band of the mini support zone.
• The chart shows that bonds fell on heavy volume, indicating conviction.
• RSI on the chart shows that bonds are now oversold. This means a bounce may occur, but investors need to focus on the longer term.
• To understand why bonds fell and the impact on your wealth, including stocks such as Apple Inc AAPL, Tesla Inc TSLA, and NVIDIA Corp NVDA, you will need to set your politics aside.  Successful investors separate their politics from their investing.
• As an important reminder, The Arora Report is politically agnostic.  The Arora Report strives to be objective and rigorously analytical to help investors.
  • Remember that prior to the 2016 election, when Wall Street had anointed Hillary Clinton as the next president, The Arora Report had correctly called that Trump would win.  At that time, The Arora Report was among the very tiny minority with the correct call.
  • When Trump won in 2016, Wall Street's wisdom was that the stock market would fall. In contrast, after Trump's win, The Arora Report call was that the stock market would rise with DJIA reaching 30,000 in Trump's first term.  At that time, no one had a call for DJIA to reach higher than 20,000.  History shows that The Arora Report had two perfect calls benefiting Arora Report members
• Yesterday, the data from the ISM Manufacturing Index came at 48.5 vs. 49.1 consensus. Weaker data should have made bonds move up, but bonds went down on the Supreme Court ruling granting Trump broad immunity.
• By now, some of you have already connected the dots, while others are asking, “What does Trump’s immunity have to do with bonds, my wealth, and popular stocks?”
• The bond market is interpreting the Supreme Court’s ruling as follows:
  • Due to the Supreme Court ruling, now there is no way for Trump’s trial related to the January 6 charges to occur before the election. This has increased the probability of Trump being the next president.
  • The bond market is interpreting that due to the Supreme Court ruling, Trump will be the most powerful U.S. president ever if he is elected.
• The bond market is interpreting the foregoing as a new era of tax cuts, borrowing, and higher deficits leading to sticky inflation.
• Yesterday, the stock market rally was blunted by the Supreme Court ruling.
• Today in the early trade, the stock market is coming under pressure as the word spreads of implications of the Supreme Court ruling.
• Smart money is interpreting the Supreme Court’s ruling as stagflation is ahead.  Many Wall Street strategists are beginning to urge their best clients to start positioning their portfolios for sticky inflation.  
• Government policies will have a major impact on your wealth.  Bonds will likely stay under pressure. The impact on stocks will be uneven. Let’s explore the impact on three popular stocks:
  • Apple (AAPL) may be negatively impacted because of Trump’s anti-China policies.
  • Unlike Biden, Trump favors Musk.  This is good for Tesla.  However, Trump is anti-EV, and Tesla has significant production in China.
  • Nvidia (NVDA) may benefit because of lesser regulation of AI.
• In noteworthy news, in the early trade TSLA stock is moving higher on announcement that in Q2 it produced 411K vehicles and delivered 444K vehicles.
• Powell is speaking at the European Central Banks Forum on Central Banking. At The Arora Report, we will be carefully analyzing the speech for signs of future changes to interest.
• JOLTS job opening data will be reported at 10am ET and may be market moving.
• As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band. The protection band is one of the large number of unique edges that are available to members of The Arora Report.

Holiday Schedule

Happy Independence Day. Liquidity is drying up as most senior Wall Street personnel are on vacation and trading desks are being manned by junior personnel.

Magnificent Seven Money Flows

Investors can gain an edge by knowing money flows in SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust Series 1 QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust GLD. The most popular ETF for silver is iShares Silver Trust SLV.  The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin BTC/USD is range bound.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash. A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.