An Overview on the Potential Market Impacts of the 2024 US Elections. Writer: Harshul Agarwal. Date Written: 08/11/2024

As the 2024 U.S. presidential elections are here, the financial markets are facing increased volatility, driven in large by the political uncertainties that remain in one of the tightest election campaigns of the 21st century. This unique dynamic has led to a shift in investment strategies, where many turn towards complex derivative volatility bets to profit from the anticipated market swings post-election day. Investment strategies have further also been influenced by the sectors each candidate is likely to support if they win. As a result, investors are closely monitoring the political landscape, adjusting their strategies to navigate the uncertainty and capitalize on the potential outcomes of this high-stakes election.

Adopting derivative volatility bets as an investment strategy may be profitable, given the election polls between the Democratic and Republican parties have been pushing investors to profit off rapidly moving markets. This approach requires involving financial instruments like options and futures, which allow investors to profit off market fluctuations rather than the direction of prices. Another method is trading derivatives tied to volatility indexes such as the VIX (Fear/Volatility) Index. This has been supported given that markets responding to geopolitical uncertainties such as the elections have numerous implications, most notably investor speculations that drive substantial consumer sentiment fluctuations.

Investors have furthermore been analysing each public appearance of the two presidential candidates to tailor their investing strategy to the potential future economic policies of the two candidates. Investors who anticipate a Trump victory will focus on investing in sectors that benefit from pro-business, “America First” stances, which include deregulation, and tax cuts, and a more aggressive approach towards trade and tariff application. This will likely include greater investments in sectors such as private defence, energy, and local manufacturing, supported by the corporate tax cuts and encouraged by pro-American patriotic mindsets. On the other hand, those who are betting upon a Harris victory are likely to invest towards industries that align with her progressive agenda, which includes infrastructure spending, climate change, as well as particularly income inequality. Investments in renewable energy are growing significantly in California, Harris’ home state, as technology companies in the region are focused on sustainable development.

Moreover, firms around the world have also been aligning their investment strategies with their predicted winner. European and Asian investors are particularly wary of changes in trade and international relations that may have a drastic impact on the stock market. Trump's “America First” approach, will lead investors towards investments in companies that support America's global independence as well as a global leader, as Trump aims to impose record tariffs on imports coming in through China.

In conclusion, the 2024 U.S. presidential election is not only influencing domestic market trends but also profoundly impacting investment strategies worldwide. This global perspective highlights how interconnected the world's financial markets are, further emphasising the importance of the U.S. as a global leader. Domestic and International investors will continue to monitor the evolving political landscape post-election and will attempt to capitalise on opportunities and risks that present themselves before the winner takes office on the 20th of January 2025.

References:

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Jpmorgan.com. (2024). U.S. Election Recap: What Could GOP Policies Mean for Investors? | J.P. Morgan. [online] Available at: https://www.jpmorgan.com/insights/markets/top-market-takeaways/tmt-us-election-recap-what-couldgop-policies-mean-for-investors [Accessed 7 Nov. 2024].

US Bank (2020). How Presidential Elections Af ect the Stock Market | U.S. Bank. [online] www.usbank.com. Available at: https://www.usbank.com/investing/financial-perspectives/market-news/how-presidential-elections-aff ect-the-stock-market.html. rrieder (2024).

Investing around the election and debt issue | BlackRock. [online] BlackRock. Available at: https://www.blackrock.com/us/individual/insights/investing-around-the-election [Accessed 7 Nov. 2024]