The upcoming US presidential election is causing concerns among investors and analysts. Excitement and a flurry of predictions fill the air. Which ones will come true? Only time will tell.
Past elections in such countries as Mexico, India, and Europe have shaken global stock markets. Experts believe America will be no exception. Investors in the US are bracing for the volatility that typically accompanies presidential campaigns and the November elections. Previously, market participants faced uncertainty related to inflation, interest rates, and geopolitical issues.
Analysts suggest that potential volatility could increase already significant risks. Currently, the US political scene features two presidential candidates: incumbent President Joe Biden and Republican candidate Donald Trump. They had their first presidential debate in late June.
Historically, the months leading up to elections have been favorable for the US stock market. Since 1960, the broad S&P 500 index has shown steady growth. The only exceptions were in 2000 and 2008, marked by the dot-com bust and the global financial crisis. In recent election cycles, US stock markets performed exceptionally well.
However, constantly rising uncertainty could cause considerable changes. Experts warn that in the current situation, optimistic forecasts may not pan out.
Market analysts caution that the upcoming US elections could keep everyone guessing until the very last minute, and clarity might not emerge even days after the vote. Such a scenario is likely to boost market volatility.
Any major event impacting the economy may disrupt the market and cause volatility, and the US elections are no exception. The futures chart of the Chicago Board Options Exchange Volatility Index, known as Wall Street's "fear gauge," indicates that traders are preparing for market fluctuations ahead of the November vote in 2024.
Yet, currency strategists at Bank of America note that the index measuring political uncertainty is at a low. This suggests the market has not fully priced in the potential rise in political uncertainty ahead of the US elections. Investors are focusing on issues like taxation, trade, and immigration. These key topics will be closely monitored. If Trump wins, it promises to be interesting. The billionaire has previously stated his intention to lower the corporate tax rate from the current 21% to 20%. He also promised to make the very important Republican tax law from 2017 permanent. Meanwhile, the Democrats are working on plans to raise taxes on corporations and wealthy individuals.
Key issues will revolve around trade and tariffs. Trump previously mentioned a 10% tariff and stricter tariffs on Chinese goods. The Biden administration introduced significant tariffs on various Chinese products, including semiconductors, batteries, solar panels, minerals, steel, aluminum, and electric vehicles.
Bide supports green energy. Analysts believe that his re-election would be good news for this sector, including electric vehicle manufacturers and charging network operators like ChargePoint Holdings Inc., Beam Global, Blink Charging Co., and battery suppliers and manufacturers. Companies in the solar energy sector, such as First Solar Inc., SunRun Inc., and Enphase Energy Inc., would also benefit under Biden. However, his re-election poses significant risks for some financial companies as his administration continues to tighten regulations, increasing capital requirements for banks like Bank of America, JPMorgan Chase & Co., and Goldman Sachs Group Inc.
A Trump victory would be a blow to companies collaborating with China, potentially facing operational disruptions due to escalating trade tensions. Companies at risk include semiconductor producers like NVIDIA, Broadcom Inc., and Qualcomm Inc., materials manufacturers like Air Products and Chemicals Inc. and Celanese Corporation, and automakers like Tesla Inc. and BorgWarner Inc.
The green energy and electric vehicle sectors, supported by Biden's Inflation Reduction Act, would face challenges as Trump is ready to repeal Biden's electric vehicle policies.
Oil and gas companies would benefit from Trump's pro-oil stance, as he has promised to lift restrictions on domestic resource extraction. Under the current conditions, experts suppose that it is worth monitoring the stocks of companies such as Baker Hughes Co., Exxon Mobil Corp., ConocoPhillips, Occidental Petroleum Corporation, and Chevron Corp.
The cryptocurrency industry could also flourish under Trump, as the former president often mentions Bitcoin and other digital assets. However, analysts speculate that this could be a tactic to attract new voters. Consequently, experts recommend paying attention to the stocks of companies like Coinbase Global Inc., Marathon Digital Holdings Inc., Riot Platforms, MicroStrategy Incorporated, and Cipher Mining Inc.
