The markets are clear: The US elections are likely to usher in a choppy end to 2024. Futures for the VIX index – known as the fear gauge – show that traders are already preparing for the risk of stock market swings around the vote.
Analysts say the dollar could rise, at least temporarily, as investors retreat to safe assets. And bond traders are aware of a possible repeat of 2016, when Donald Trump’s victory triggered a sell-off over fears that the tax cuts would push interest rates higher by adding fuel to an already growing economy.
But beyond that, the long-term implications for stocks, bonds and currencies are difficult to predict, complicating efforts to provide a well-defined playbook on how to best position yourself for one outcome or another.
A victory for President Joe Biden, as in the case of the incumbents, would likely have less impact on financial markets simply by staying the course. On the contrary, Trump and his advisers have presented plans – on immigration, trade, taxes and the Federal Reserve – that could significantly alter the current calculus, although little if any of that appears to be in the cards at this point.
Plus, there’s another unforeseeable factor: Trump was found guilty of 34 counts of falsifying business records to conceal a money payment to an adult film star before the 2016 election, making him the first former US president. . convicted of crimes. “Markets don’t like uncertainty,” said Steven Blitz, American chief economist at TS Lombard. “There are many positions before the game.”
The stock market has tended to advance under presidents of both parties, influenced more by the direction of the economy and interest rates than by fiscal policy. Trump and Biden were no exception.
Still, UBS strategists led by Solita Marcelli bets that a Democratic sweep of the White House and Congress would be the weakest outcome for the broader stock marketgiven Biden’s interest in raising the corporate tax rate.
Republicans, for their part, would be more welcomed as they promise fewer taxes and fewer regulations, although this could be offset by concerns that their policies will stoke inflation. disrupt world trade and keep interest rates high. The impact would be more limited if either had to face a divided Congress.
Tesla, chips and commerce
In some key industries, the implications are a little clearer. Biden has tried to accelerate the shift to electric vehicles, while Trump has lashed out at the sector. That has raised the stakes for manufacturers like Tesla, Rivian Automotive and Lucid Group, as well as for battery manufacturers and parts suppliers. All of them would likely be affected if Trump revoked tax credits granted to buyers.
While Biden has increased tariffs on Chinese imports, Trump has proposed going even further, with tariffs of 10% on all imports and 60% on those from China. This would raise consumer prices or reduce profit margins for companies such as retailers and electronics manufacturers, which are especially reliant on imported goods.
Eyes on the dollar
The direction of the dollar is at stake. It has risen this year on speculation that the Fed will keep interest rates high. But it is said that the advisors of Trump have discussed ways to devalue the currency, which could boost exports but worsen inflation by making imports more expensive.
The dollar can also function as a haven during periods of uncertainty. Some analysts think that is likely to boost the dollar temporarily, as has often happened before the last US elections.
