The 2024 US presidential election between Donald Trump and Kamala Harris could have significant impacts on financial markets and the economy. Here are some key potential effects:
Equity Markets
A Trump victory may initially provide a boost to US equities, particularly in sectors like energy, defence, and financials that could benefit from deregulation. However, Trump's trade and immigration policies could create headwinds for stocks longer-term.
A Harris win may be more neutral for equities overall, with possible support for clean energy and infrastructure stocks. Her policies would likely represent more continuity with the current administration.
Economic Growth
Trump's policies of tax cuts and deregulation could provide a short-term economic boost, but trade tensions may offset some gains. Harris would likely pursue more government spending on social programs and infrastructure, which could support growth, but potentially higher taxes could be a headwind.
Treasury Yields
Treasury yields may rise under either candidate due to high government deficits and debt levels. However, yields could potentially rise more under Trump due to inflation concerns from trade policies. The 10-year Treasury yield is projected to reach 5% by 2026 regardless of who wins, though it may be slightly higher under Trump.
US Dollar
A Trump victory could initially strengthen the dollar as a safe-haven play, though his stated desire for a weaker dollar creates uncertainty. The impact under Harris may be more neutral, continuing current dollar trends.
Inflation
Trump's trade and immigration policies present larger upside risks to inflation, which could force the Federal Reserve to keep interest rates higher. Harris' policies may have a more muted impact on inflation, allowing for potentially looser monetary policy.
In summary
While both candidates would likely pursue expansionary fiscal policies, Trump's approach could create more near-term market volatility and inflationary pressures. Harris may represent more continuity, but still faces challenges in addressing high deficits and debt levels. Ultimately, a divided government could limit the scope of major policy changes regardless of who wins. It will be a difficult path for the Federal Reserve if inflation rises, having already started their rate cuts, especially with market expectations of further rate cuts already priced in.
If you need clarity on where to invest and more importantly where to avoid, then let us know and we’ll happily help you build a risk-controlled strategy that meets with your investment objectives.
These are difficult investment times with increased geopolitical risks, where volatility can increase and market sentiment quickly dissolve, so professional investment advice is imperative.
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