After the withdrawal of the President of the United States Joe Bidenthe vice president Kamala Harris quickly gained the support of prominent party members, including Bill and Hillary ClintonDemocratic leaders in Congress Chuck Schumer And Hakeem Jeffries and, “last but not least”, last but certainly not least, Barack Obama with his wife Michelle. His campaign has, in a short time, raised 81 million dollars, dispelling doubts about the financial weight of the Democrats. However – while waiting for the official nomination of the Democratic candidate for the US elections (expected during the Democratic Party convention scheduled in Chicago between August 19 and 22) and the next televised debate scheduled for September 10 – the markets remain skeptical on Harris’ chances against Trump. The tycoon is currently estimated to have a 61% chance of winning the election.
The impact of the “Trump trade” on the markets
If Harris gains popularity in the polls, the “Trump trade” – says Jochen Stanzl, Chief Market Analyst at CMC Markets – could lose its appeal, potentially putting pressure on small US companies, oil and gas producers, gold and Dow Jones stocks, but also easing volatility in US bond markets. Equity markets are, in fact, currently under pressure due to a weak seasonal phase and a turbulent election campaign, resulting in increased volatility. Investors also assume that the Federal Reserve American could cut interest rates in September, which could temporarily overshadow the election campaign.
Uncertain times before the elections
Previous polls showed Trump leading due to Harris’s low approval rating. However, a new Reuters/Ipsos poll shows Harris ahead of Trump, 44% to 42%. It’s worth noting that previous polls often overrepresented Democratic voters, while other polls still indicate a greater chance of a Trump victory. The current The stock market’s upward trend is mainly driven by strong corporate earningsespecially in the S&P 500 index, which is posting its highest earnings growth in recent years. However, Stanzl points out, even with good results, stocks like Alphabet can collapse as high investor expectations lead to profit-taking.
Towards a “Harris trade”?
“With the surge in fundraising and access to Harris’s campaign funds,” explains Garrett Melson, Portfolio Strategist Natixis Investment Managers Solutions, “there is plenty of time for a tug-of-war between the prevailing Trump trade and the Harris trade, which will likely bring back a stalemate scenario on Capitol Hill.” For now, however, investors continue to expect a Trump victory “by focusing,” Melson notes, “on the sectors that benefited from the deregulation and tax developmentssuch as financials, cryptocurrencies and small caps, and on cyclically sensitive areas of the market that would benefit from a supposedly growth-oriented agenda.”
