November’s US presidential election is expected to shake up the markets. But ultimately, what impact could the election have on the markets?
In October, market sentiment was relatively strong in the equity market, and led by Nvidia, US technology stocks have recovered from their early autumn plummet. Also the summer’s rotation from technology stocks to other themes and sectors has slowed.
Fixed income has been a hot topic on the markets recently. Interest rates have begun to rise especially in the United States in recent weeks, due to strong economic data and election expectations. Rising interest rates gnawed away at fixed income investors’ returns in October.
The growth outlook has once again strengthened in the USA, supported by good economic data. For example, September’s US labour market figures, released in October, were very strong compared to forecasts. Earlier, labour markets put a strain on the growth outlook, but in light of the most recent figures, this no longer appears to be the case.
Right now, the focus is still on the US labour market when it comes to economic data, and this Friday's figures will help create a more fully formed picture of the outlook. We can expect messy data as a result of the intense weather phenomena and strikes.
In other aspects too, recent economic data has been strong in relation to expectations in both the USA and other market areas. The majority of the growth is still, however, coming from the service sector while the challenging situation in the industrial sector continues.
Market volatility, i.e. price fluctuations, is expected to grow with the looming US presidential election, to be held on 5 November 2024. It is extremely difficult to predict the long-term impact the election will have on the markets, but in the short term, it may shake up the markets considerably. However, with almost the entire market prepared for fluctuations in the upcoming weeks, volatility expectations may keep market volatility in check.
At this point, the election still remains extremely tight. Currently, the most likely (but not the only) scenario is that the presidential election will be decided by a close majority in many states.
Recently, various polls and the markets have both put the Republican Party’s Donald Trump ahead of the Democrats’ Kamala Harris. Furthermore, the likelihood of a Republican win in the concurrently organised elections for the US Senate and House of Representatives has grown. This is also key in terms of the markets because if a single party wins in all three elections, it is easier for the party to implement its own policies during the term of office.
The differences between the candidates and parties are still very small, especially in the presidential and House elections. If no major surprises occur, the presidential election will presumably be played out in the seven swing states where polls have shown very close results. The final vote count typically takes several days, which means that we may have to wait some time for the result.
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