While Kamala Harris overcome Trump nand the polls, the markets I’m in turmoil cwith speculation about the future. A new situation that has led investors to reevaluate the much-debated Trump Trade and to reflect on the implications of a victory democratic or republican. Althea Spinozzi, Fixed Income Strategist of BG SAXO and Saxo Bank – outlines possible scenarios in a detailed analysis.
What to expect from financial markets
As the elections approach, “it is foreseenthere is some market volatilityinfluenced by news regarding presidential campaigns. However, it will be the hard data that will guide the asset performance. The slowing U.S. economy, rising unemployment and stable inflation near 2% suggest that the Federal Reserve may cut interest rates, potentially giving a boost to bonds and stock markets overall.”
The investors should prepare for the volatility and focus on economic indicators to face this period.
What is the Trump Trade and why is it being questioned?
The Trump Trade suggests that some sectors of the US economy, such as banking, industry and energy, would benefit advantage deregulation and tax cuts. Bitcoin is favored, while fixed income, especially US Treasuries, looks less attractive due to expected fiscal spending and the resulting upward pressure on bond yields.
With Harris Enters the Field and the Democrats that might be more likely to win, “the market is pricing in a scenario without the Trump Trade. While fiscal spending is expected to remain elevated, benefiting the middle and lower classes, the impact on US Treasuries could still be bearish due to rising yields.”
How is the bond market reacting to the elections?
The potential for significant fiscal spending under both administrations “is putting pressure on bond yields. This basically means that regardless of which political party wins, government spending is likely to be high.”
A Republican victory “will carry forward the Trump Tradewhich implies more fiscal stimulus, pushing bond yields higher and reducing the attractiveness of fixed income. Conversely, while a Democratic victory could also keep spending levels high, it could also focus on different fiscal priorities, continuing to push bond yields higher. When yields rise, new bonds offer better returns than existing ones, and the value of old bonds declines. As a result, investors may be apprehensive about holding bonds, anticipating lower prices and potential losses on their current bond investments.”
Democrat or Republican President: Which Stock Market Sectors Will Be Impacted?
THE Democrats in the White House “could support sectors such as health care, technology and renewable energy, maintaining their recent gains. Republicans would favor the banking, industrial and energy sectors, driven by deregulation and tax policies favorable to these sectors.”
