"Trump Concept Stocks" Soar 175% in Six Days!

The US primary elections for the presidential race have kicked off, and investors are flocking to Trump-related stocks. Industry insiders commented that the market has gone completely crazy.

On January 21st, Florida Governor DeSantis announced his withdrawal from the race and expressed his support for his competitor, Trump. As a result, the stock price of Digital World Acquisition Corp, a SPAC company merging with Trump's social media platform Truth Social, soared by 88% on the same day, marking its largest single-day increase in over two years.

On January 15th, Trump won the Iowa party primary with a majority of the votes, setting the stage for the "Trump-related stocks" market. Currently, the stock has been soaring for six consecutive days, with an increase of nearly 200%, reaching its highest level since May 2022.

SPAC (Special Purpose Acquisition Company), also known as a "blank check company," is listed solely for the purpose of financing and then seeks investment targets within a certain period of time. By merging and acquiring the target company, it becomes a listed company. Therefore, many companies seeking to go public choose to use SPAC as a "shell" for listing.

In 2023, Digital World Acquisition Corp acquired Trump's social media company, Trump Media & Technology Group (the parent company of Truth Social), and plans to go public through SPAC. The merger is still in progress.

Julian Klymochko, CEO of Accelerate Financial Technologies, commented on this:

"The market has gone completely crazy."

He pointed out that the current stock price implies an "overvalued" valuation of $8 billion:

"The stock does not reflect any fundamental intrinsic value of Truth Social, but rather resembles a can of sardines used for trading or a speculative tool."

According to Bloomberg, the recent surge is mainly driven by investors converting out-of-the-money call options, which is a favored investment strategy for retail investors and has been the driving force behind many previous "meme stock" trends.

Currently, the most active options are those with a strike price of $55 or higher, a level not reached since April 2022. According to a recent report by Goldman Sachs analysts Dominic Wilson and Vickie Chang, if the Republican Party wins and takes control of both houses of Congress, it is expected that the US dollar will strengthen in the future, inflation will be higher than the historical average, US Treasury yields will rise, and the yield curve will steepen. At the same time, there may be an increased risk of significant fluctuations in energy prices.

In light of this, Goldman Sachs suggests the following strategies:

1. Long-term holding of USD options.
2. Long-term call options on deeply out-of-the-money US Treasury yields.
3. Positions that may benefit from higher volatility in foreign exchange or stock markets at the end of the year.
4. Deeply out-of-the-money positions in gold, which may benefit from increased geopolitical risks.

Goldman Sachs also points out in the report that in the 10 months leading up to the election, they are unable to predict the outcome and do not have confidence in trading based on these results. This means that the differences between different election outcomes may be incorporated into the overall pricing distribution.