With all eyes on Monday night's first presidential debate of this election, some traders are looking for ways to cash in.
Kathy Lien, managing director of FX strategy at BK Asset Management, believes that currency markets could be in store for a big shakeup. More specifically, Lien believes that the dollar-yen is in "serious risk" of falling to the downside, meaning that shorting the U.S. dollar against the Japanese yen could be the trade ahead of tonight's debate between Donald Trump and Hillary Clinton.
According to Lien, since 1980 U.S. stocks have traded lower the week after a presidential debate 80 percent of the time, and a repeat of a sell-off could send USD/JPY down. But on top of that, she doesn't see the market pricing in the potential of a Trump victory.
"The market is thinking that Donald Trump is going to end up sabotaging himself, and I think that's underestimating the possibility of him crushing Hillary," Lien said Monday on CNBC's "Power Lunch." "If that's the case, we could see a much larger reaction in dollar-yen to the downside than to the upside," given that Lien believes a Trump win would be bearish for the U.S. currency.
Oppenheimer technician Ari Wald suggests betting on the defense sector ahead of the Monday night debate. Defense stocks are currently up more than 9 percent year-to-date, led by big names like Lockheed Martin and Northrop Grumman, which have risen over 13 percent and 15 percent this year, respectively.
In Wald's opinion, one of the best picks in the space is aerospace company General Dynamics. The stock recovered significantly from its post-Brexit slump, surging more than 16 percent since its June lows. Looking at a chart of General Dynamics, Wald points out that the stock looks set to break above what he sees is a resistance line at around $155 as it continues its rally.
"We're expecting a Q4 market rally, and we think a stock like General Dynamics should be leadership through that move. We like [the defense sector] a lot," said Wald.
Monday's debate will be watched closely as Hillary Clinton and Donald Trump have been neck and neck in many key states. A WSJ/NBC poll from last Thursday put Clinton with a 6 percent lead ahead of Trump nationally, but both candidates are still viewed negatively by the majority of American voters.