BofA says these trades combine seasonals for 3Q, the month and the presidential cycle

Seasonal trends favor the Nasdaq 100, a stronger U.S. dollar and lower global bond yields, according to Bank of America. It's possible the market will do a repeat of the third quarter of 2018, BofA technical strategist Paul Ciana wrote in a note Sunday that examined top trades for seasonality around third quarters, the month and the second year of an American presidential cycle. That would argue for going long U.S. equities and the U.S. dollar while shorting Treasurys and commodities, he said, The bank said the backdrop could become more defensive because this point in the presidential cycle has historically been associated with weaker equity performance. But the Nasdaq 100 has risen in every third quarter since 2018. July has been particularly strong, with the index advancing about 68% of the time by an average 1.72%, although the bank cautioned that September has typically been weaker. BofA highlighted several other trades that have tended to outperform during those time periods. They include dollar strength versus the Brazilian real and South African rand, lower yields in developed markets outside the U.S., and going long Australian stocks. Historically, USD/BRL and USD/ZAR have risen about two-thirds of the time during the third quarter, averaging 4.73% and 2.74% gains respectively, BofA said. On rates, the strategists said overseas government bond yields have typically fallen during the third quarter, particularly in July and August. …