Trump vs. Harris: How US election results could impact global markets

• Markets predict return of President Trump via "Trump trades"
   
• National polls: Harris vs. Trump race one of the closest in modern history
   
• Harris win could offer relief for EUR, CNH, MXN, China and European stock indexes, green energy US stocks
   
• Trump win could boost USD, Bitcoin, RUS2000, US stocks in oil, banking, and cryptos
   
• Split Congress could be "business as usual" for rising risk assets
   
• Contested / violent outcomes could spark surge in safe havens (gold, USD, etc.)

 

In-person voting is now underway for the 2024 US Presidential Elections.

To manage expectations right from the onset, it could be days, perhaps even weeks, before we discover whether Kamala Harris or Donald Trump has become the next President of the United States.

As the world waits to find out who will next occupy the White House, and with markets mostly at a standstill in the interim, here's a quick check list of crucial markers to look out for along the way:

• Midnight GMT time, Wednesday, November 6th: Polls start to close and initial results feed out through news outlets
   
• 270 votes: The "magic number"; least Electoral College votes needed to become the next president.
   
• 7 battleground states: Georgia, North Carolina, Pennsylvania, Arizona, Michigan, Wisconsin, and Nevada - the voting results from these states could heavily sway the race towards either candidate.

 

Why are the US presidential elections so important for markets?

The 2024 presidential elections will determine whether Harris or Trump will be the leader of the world's largest economy over the next 4 years.

These two presidential candidates have vastly different views on how the US economy should be run, with contrasting policies from taxation to the environment, and even how America interacts with the rest of the world.

With so much at stake, the policies of the next POTUS are bound to affect the values of stocks, FX, commodities, and even cryptocurrencies worldwide.

 

Which candidate do markets think will win?

Donald Trump has been favoured by certain segments of the global financial markets.

The likes of the US dollar, Bitcoin, and even US oil and banking stocks have risen as part of the so-called" Trump trade" in recent months.

 

To be clear, a Trump win is far from certain.

Leading up to the November 5th voting day (today), national polls still point to a neck-and-neck race between Harris and Trump.

It's still too close to call, with the final official result perhaps days or weeks away.

 

While bracing for any incoming volatility, perhaps any delays could buy market participants more time to furnish up their trading/investment strategies for the days, and even years ahead, with these 4 potential scenarios as a rough guide:

 

Scenario 1: Trump Wins – potential boost for US Dollar, RUS2000 stock index, and Bitcoin

Here’s why:

• Stronger USD: A Trump win could support a stronger dollar due to policies focused on American business growth, tax cuts, and pro-US trade strategies.
  Such measures could reignite US inflation, to the point of perhaps slowing the pace of Fed rate cuts.
  This means the dollar may gain value against other currencies, creating short-term opportunities for FX traders.
   
• US stocks could rally: Trump’s economic focus on industries like oil, banking, and the crypto sector. Such pro-business policies might lead to a rally in the share prices of companies operating in those sectors.
  Even the likes of Exxon (oil), JPMorgan (financials), and MicroStrategy (cryptos) have already posted their respective record highs in October amidst the "Trump trade".
   
• Crypto surge: Trump has already declared his desire to make the US the crypto capital of the world. A less restrictive regulatory approach should favour Bitcoin, the world's largest crypto, and potentially along with its smaller peers.

 

Scenario 2: Harris Wins – potential relief for currencies and stock indexes of major US trading partners (Europe, China, Mexico, etc.)

Here's why:

• Softer US dollar: Harris's fiscal plans, while still focused on increased government spending, isn't perceived to be at major risk of fanning US inflation. This should allow the Fed to resume with its intended rate cuts in the years ahead, while prompting the US dollar to resume its moderatng path downwards.
   
• Relief for EUR, CNH, and MXN; European and Chinese stock indexes: Compared to Trump, Harris isn't looking to be antagonistic towards other major economies such as the Eurozone, China, and Mexico. An incoming US administration that has a pro-globalisation stance should spell immediate relief for the euro (EUR), Chinese yuan (CNH), and Mexican peso (MXN), along with Chinese and European stock indexes.
   
• Green Energy Gains: Harris’s support for renewable energy is likely to benefit stocks in solar, wind, and electric vehicles (EV). For investors focused on sustainability, this scenario offers strong growth potential for the years ahead.

Overall, Harris offers "policy continuity" from her predecessor President Joe Biden.

A Harris win could also trigger the swift unwinding of the above-mentioned "Trump trades", i.e. sudden drops for the US dollar, Bitcoin, and the RUS2000 index.

 

Scenario 3: Split Congress – "Business as usual" for rising risk assets (e.g. US stocks)

If the election results in a split Congress, where neither party has full control, expect some interesting impacts:

• USD weakness possible: A split Congress may lead to policy gridlock, with no significant changes to boost the USD. As a result, the dollar may face weakness, as the Fed's rate-cutting plans are left undisturbed.
   
• US stocks to rise: Historically, a divided Congress has been positive for US stocks, as investors see less risk of radical policy changes. This could mean modest gains across the board, with market stability but no major shifts.

 

Scenario 4: Contested Election Results – Safe havens up, risk assets down?

Already there are concerns that the outcome is bound to be decided in the courts, with fears that violence might even break out among disgruntled voters.

If such a scenario materialises and heightens market fears:

• Stocks, cryptos may tumble: Riskier investments like global stocks and cryptocurrencies might fall until calm is restored.

• Gold, USD could rise: Gold, the US dollar, and other safe-haven assets may rise as investors seek security during such uncertain times.

 

Key Takeaways: How to Prepare

No matter who wins, the US election will likely bring both opportunities and risks.

Here are some strategies to help you navigate this period:

1. Stay Updated: Closely watch for early election results, especially in swing states. Markets tend to react quickly to unexpected outcomes, so staying informed can help you make timely decisions.

2. Diversify: Election-related volatility makes this a good time to review and diversify your portfolio. Spread your investments across assets to manage risk more effectively.

3. Know Your Risk Appetite: If you're more risk averse, safe-havens assets may offer a hedge against heightened volatility during this election season. For traders and investors with larger risk appetites, various instruments across FX, stock indexes, commodities and cryptos may offer a rare chance at market opportunities that only come round once every 4 years.

 

Final Thoughts

The 2024 US Presidential Election could reshape financial markets in many ways, both for the immediate term, as well as for the coming years.

A win for Trump or Harris, a split Congress, or a contested result - each comes with its own set of market implications.

By staying informed and having a clear investment and trading strategy, you can navigate this period of uncertainty and make the most of potential opportunities.

 

 

Election Donald Trump Kamala Harris Dollar Bitcoin stock cfds indices Gold