How Hedge Funds Invest Post Election

by, Jeremy Reif, CRPS

How The Professionals Invest

Hedge funds monitored the U.S. presidential pre- and post-election and adjusted their strategies to capitalize on potential market shifts in its aftermath.  Hedge funds have strayed from being more conservative and are slightly riskier than in previous election years.  They are betting on four major sectors: technology, healthcare, energy and defense.

It did not matter who became president, as both candidates focused their campaigns on four sectors.  How these sectors unfold for the next four years is a wait-and-see.  One thing is for sure, the President-elect will make changes once he enters office.

Technology

Technology continues to be a hot topic.  There is no denying that the artificial intelligence movement will continue.  Companies will continue to learn how to incorporate A.I. into their businesses.  How quickly will A.I. grow?  The technology sector will continue to be and will see new scrutiny based on lawsuits for privacy protection and anti-trust issues as it moves into uncharted territory.  In the last six months, this sector has come under pressure as A.I. is non-tangible and this has become a sticky point as to if A.I. is can continue to grow at the same pace as it has in the recent year.

Healthcare

Healthcare is a revolving door with both Medicare and Medicaid being underfunded.  There is now enough data to show that the Affordable Healthcare Act did not work as intended.  The overarching goal to set prices for common procedures or commoditize prices for insurance costs, medication and procedures has not worked. The costs for healthcare continue to increase at rates higher than inflation. The health insurance billing abuse continues.  Hedge funds are assuming that the next four years will continue to favor companies in the healthcare sector.  Trump suggested that Robert F. Kennedy Jr. would shape the public health agenda of his administration.

Natural Resources

Energy has been a topic since the Industrial Revolution.  Wars have been fought many times over for control of energy and natural resources.  The debate between green and oil.  The Biden/Harris administration had pushed for green and electric vehicles, but at what costs does this come with for U.S. Jobs and global natural resources?  Oil is still relatively cheap and will continue to be utilized around the world regardless of if the U.S. goes green and hedge funds are positioned to hold to this philosophy.  Trump was pro oil the last term he served.  It may be possible to see him redo a lot of the things that Biden unwound from his first Presidential term.

Defense Sector

Shifts in military spending or foreign policy could affect defense contractors.  Despite the Biden administration pulling U.S. troops from Afghanistan, they still have remained active in both the Russia/Ukraine or Israel/Hamas wars.  The U.S. has not been actively fighting, but rather they have been sending financial, military and humanitarian aid.

Hedge funds have adopted a more aggressive stance heading into 2025 while simultaneously implementing targeted hedging strategies. They are focusing on sector-specific opportunities, currency movements, and overall market volatility based on the election outcome. As the political landscape evolves, these sophisticated investors will continue to adjust their approaches to capitalize on emerging trends and protect against potential risks in the post-election environment.