The battle is intensifying between the candidates for the presidential election in the United States, which will be held on Tuesday, November 5 of this year. The candidates are the Republican nominee, former President Donald Trump, and the Democratic nominee, current Vice President Kamala Harris. There appears to be a significant closeness between the two candidates, with Trump slightly ahead of his opponent in the latest polls. However, the question that everyone, especially economists, investors, and traders, is asking is: How will the victory of either candidate affect the financial markets?
First, let’s examine the perspectives of each candidate regarding several issues, including fiscal, monetary, foreign, trade, and investment policies.
In the event of Trump’s victory:
- Fiscal policies: An expansionary fiscal policy is expected to prevail under Trump, as he has pledged to reduce taxes on corporate revenues, which may provide a positive momentum for corporate stocks, with expected increases in profits, especially in sectors such as manufacturing, energy, and technology, particularly among large tech companies.
- Monetary policies: An expansionary monetary policy is likely to prevail under Trump, with the possibility that he will pressure the Federal Reserve to lower interest rates, which could support stock markets but increase inflation risks in the long term.
- Trade policies and foreign relations: Trump’s foreign policy does not seem to be in the best shape, as he has threatened to impose significant tariffs on imported goods, specifically from China, the European Union, Mexico, and other countries, in order to support domestic industry and local manufacturing companies. He also believes that the revenues generated from these tariffs will offset the expected tax cuts. It is noteworthy that increasing tariffs could reflect on the prices of goods, leading to higher costs for American citizens and increasing inflation, which would also impact the Fed’s monetary policy, potentially resulting in higher interest rates and upward momentum for the U.S. dollar index.
- Investments in the oil industry: Trump has raised the slogan “We will drill, dear, we will drill,” promising to facilitate exploration operations further and lift the restrictions imposed by the Biden administration on cars and power plants, which will provide positive momentum for oil prices and the energy sector.
In the event of Harris’s victory:
- Fiscal policies: Harris is likely to adopt more stringent tax policies towards corporations and the wealthy, which could lead to downward pressure on corporate stocks, potentially affecting the profits of large companies, especially in the tech sector.
- Monetary policies: Harris is likely to support a tighter monetary policy to address inflation, which could affect market liquidity and lead to higher interest rates, potentially putting pressure on the stock market, particularly on high-growth stocks.
- Trade policies and foreign relations: Her foreign relations are expected to be less aggressive and more positive, particularly with China, the European Union, and Mexico, which may alleviate uncertainty in the markets.
- Investments in clean energy: Harris is likely to focus on investing in clean energy and infrastructure, which could support companies operating in those sectors. These policies could promote the growth of sustainable industries and renewable energy.
What are the expectations for asset movements in the event of Trump’s victory?
Given the expansionary monetary and fiscal policies expected under Trump, along with uncertainty regarding foreign relations and the possibility of imposing significant tariffs on imported goods from China, the EU, and other countries, we are likely to see an increase in inflation rates. Consequently, the U.S. dollar index, which measures the dollar’s performance against a basket of six major currencies, may rise to levels between 107.00 and 114.00 points, alongside an increase in U.S. Treasury yields (a decline in Treasury prices) across various maturities, such as the two-year bond yield, which is expected to exceed 5.00%.
Regarding gold, the global central banks’ purchasing of gold, especially from BRICS countries distancing themselves from the dollar, will likely continue with Trump’s arrival, along with ongoing geopolitical tensions worldwide and rising global inflation. This could provide upward momentum for gold, which may reach price levels between $2,800 and $3,000.
In terms of global stocks, we might see a rise in U.S. stocks, particularly in the technology, energy, and manufacturing sectors. Therefore, we could continue to record levels for U.S. indices like the Nasdaq 100, S&P 500, and Dow Jones. Conversely, we might witness a decline in European and Chinese indices due to potential trade tensions between the Trump administration and other foreign parties, as well as economic uncertainty in China and Europe.
Regarding cryptocurrencies, specifically the leading currency “Bitcoin,” it may reach new record levels up to $100,000, especially with Trump’s pledge to make the U.S. the global capital of cryptocurrencies. For the euro, we might see weakness and parity with the dollar, with the EUR/USD exchange rate possibly ranging between 0.9500 and 1.0500. Regarding the USD/CNY pair, there is a possibility it will rise to levels between 7.2500 and 7.3500.
As for crude oil prices, there is ambiguity and uncertainty, especially since many factors influence the oil market, such as OPEC+’s effect on production and supply, in addition to supply outside OPEC+ from countries like Canada, Brazil, and the U.S., as well as oil demand. However, we may see some support from the Trump administration, as he has promised to facilitate exploration operations.
What are the expectations for asset movements in the event of Harris’s victory?
With Harris’s administration maintaining good foreign relations with other countries, such as the EU, and despite a somewhat poor relationship with China, it remains better than the Trump administration’s relationship with China. Additionally, we may see rising inflation rates due to ongoing fiscal spending and increasing U.S. debt and budget deficit. Therefore, we might witness stability in the U.S. dollar index with an upward trend, trading between levels of 100.00 and 110.00 points.
Regarding gold, continued purchases by global central banks, particularly from BRICS countries distancing themselves from the dollar, along with ongoing geopolitical tensions and rising global inflation, could provide upward momentum for gold, which may reach price levels between $2,800 and $3,000.
In terms of global stocks, we might see a rise in U.S. stocks, particularly in sectors related to solar energy, clean energy, and healthcare. However, we may see pressures on U.S. indices like the Nasdaq 100, S&P 500, and Dow Jones. For European indices, we might see an increase due to the good trade relationship between the U.S. and Europe.
Regarding cryptocurrencies, particularly Bitcoin, we may also witness new record levels; however, caution remains, especially concerning the regulation of cryptocurrencies by the U.S. Securities and Exchange Commission. For the euro, we may see positive momentum for the EUR/USD pair, potentially ranging between 1.0500 and 1.1500. As for the USD/CNY pair, there is a possibility it will range between 7.0000 and 7.3000.
Finally, regarding crude oil prices, there is ambiguity and uncertainty, especially as many factors influence the oil market, but we may see negative pressures during Harris’s administration, as she has stated she will support clean energy.
In summary, we can say that there is no doubt we will witness significant fluctuations in the financial markets after either candidate assumes the presidency, due to several reasons, including global economic uncertainty, geopolitical tensions, and the ambiguity of monetary and fiscal policies worldwide. Therefore, we must exercise caution when selecting financial assets for our investment portfolio, emphasizing the importance of diversification and selectivity.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
