This year’s US presidential election is one of the closest in recent history, with financial markets anticipating its effects. But the importance of elections is not limited to the position of president only; traders closely monitor the results of the elections for the Senate, the House of Representatives, state governors, legislators, and members of the Assembly. In fact, these elections can bring about major changes in US policies, which enhances or weakens the movement of financial markets.
Elections, whether their outcome is in favor of a particular candidate or against another, always create a state of uncertainty in the markets. This anxiety forces traders to remain in a state of constant alert.
as a state of tension prevails in global markets, which prompts them to anticipate events and follow sophisticated strategies. For example, the price of gold, as well as the US dollar, can be affected by sudden changes in US policies.
The most important areas that can be affected by elections are diplomacy and trade. Changes in trade policy can reshape economic relations between the United States and the rest of the world. Consequently, fluctuations in commodity and currency prices can occur as a result of any potential changes in trade policy. As for fiscal and tax policies, election results can have a significant impact on future economic decisions, such as changes in tax rates or increased government spending. This can improve or weaken the US economy.
Elections also directly affect market sentiment. During the election period, tensions rise, creating volatility in financial markets. Traders often adopt a cautious approach during elections, leading to low trading volumes and high levels of volatility. However, after the results are announced, market reactions are likely to accelerate as traders discover how a particular candidate’s victory will impact future fiscal policies.
Diplomacy and Trade: Consensus or Collapse?
Trade policy is one of the most closely watched areas in the upcoming elections.
especially with the ongoing economic tensions between the United States and China. The outcome of the election could determine the course of these relations.
as a Trump victory could lead to a tightening of trade policies and an increase in tariffs on Chinese imports. This could help reduce the US trade deficit, but tensions are likely to escalate further, affecting market movement.
In contrast, a Kamala Harris victory is not expected to lead to radical changes in trade policies. Trade policy under her administration could gradually improve relations with China, but it will not make sudden changes. However, gold could benefit in both cases, whether under Trump or Harris, given the potential turmoil in trade markets. Gold, as a safe haven, could see prices rise if concerns about the consequences of trade policies increase.
Fiscal Policy: More Spending and Debt, but How Much?
Government spending is expected to increase if either candidate wins, but each will adopt a different approach to it. With the US national debt at a record $34.5 trillion, a Trump victory could mean a conservative economic policy.
with a focus on spending cuts and increased tax cuts. However, domestic debt is expected to rise due to Trump’s plans to stimulate the economy.
On the other hand, a Kamala Harris victory could mean an increase in government spending.
especially on social programs, such as health care and education. Harris is also likely to adopt a less tax-cutting policy than Trump. It is clear that either candidate will pursue a policy that could lead to an increase in the national debt. However, confidence in financial markets is likely to persist, as some expect markets to remain positive, even with the rise in domestic debt.
Market expectations after the election
If the debt ceiling is raised again, markets are expected to remain optimistic despite this increase. The dollar may continue to stabilize or even make small gains in the short term as a result of the expected economic decisions after the elections. At the same time, gold may witness sharp fluctuations in global markets, reflecting the state of anxiety that traders may feel due to the escalation of political and trade tensions.
Overall, the upcoming elections will have a significant impact on global markets. Many financial indicators are likely to change in the event of the victory of either candidate, making the coming period full of opportunities and challenges that traders will have to prepare for.
As for monetary policy, the Federal Reserve’s directions may change based on the results of the elections. If the monetary policies of the next president include economic stimulus or fiscal tightening, these changes may affect the markets, especially in interest rates. These adjustments may also create repercussions for the movement of currencies and interest rates in the future.
Monetary Policy: Can the new government pressure the Federal Reserve on interest rates?
Although fiscal policy is under the government’s supervision, monetary policy remains the responsibility of the Federal Reserve. For example, in 2018 and 2019, President Trump repeatedly expressed his belief that interest rates were too high.
but his statements did not significantly influence the Fed’s decisions. The Fed is expected to continue cutting interest rates regardless of who wins the election, in response to inflation and prevailing economic conditions, not political pressure.
Traders’ expectations for rate cuts have changed significantly. Although the election may affect fiscal policy, monetary policy will not be affected significantly unless extreme government action is taken that affects inflation
Financial instruments most affected during the election period
Financial instruments most affected during the election period
1: US Dollar (USD)
Although the election may affect the currency market, the monetary policy of the Federal Reserve will remain the most influential factor in the movement of the US dollar. Traders will need to monitor inflation and employment data.
as they will have a greater impact on the dollar than the outcome of the election itself.
2: Stocks
If Kamala Harris wins, sectors such as technology and healthcare may face more regulations.
which could lead to volatility in the stock markets. On the other hand, Trump’s policies may be more in line with tax cuts and trade policies.
which could boost markets in some sectors. However, it cannot be ignored that the uncertainty surrounding trade wars and potential new tariffs could affect the performance of the stock market if Trump is re-elected.
