Election Uncertainty Sparks Market Volatility
As the 2024 presidential election draws near, investors are bracing themselves for a wild ride. The S&P 500 has rallied 20% so far this year, making it the best Election Year through October since 1936. However, this outperformance could be short-lived as the too-close-to-call race is expected to trigger market volatility.
The Trump Trade Returns
Predictions market Polymarket currently shows a 59.5% chance that Donald Trump will win the election, prompting a return of the so-called Trump trade. Treasuries have dropped, and gold has soared as investors bet that Trump’s proposed policies surrounding tariffs and tax cuts could prove to be inflationary.
Key Themes Emerge from Campaigns
Given the key themes that have emerged from Trump’s and Harris’s respective campaigns, financial experts are weighing in on what a Republican versus Democratic presidency means for business and Wall Street.
Financials: A Top Trade Under a Republican Presidency
Financials are viewed as a top trade under a Republican presidency, with expectations of looser regulation and increased M&A activity. According to Fitch Ratings, a July 2021 executive order under the Biden-Harris administration has impeded deal activity, guidance that is expected to change under Trump.
Gold Prices Soar
The expectation of higher spending under a second Trump administration has sent gold prices to record highs. The precious metal closed the week at $2,734.44 an ounce, bringing its year-to-date gains to 34%.
Managed-Care Insurers Could See Relief
Managed-care insurers could see some relief under a second Trump administration due to the likelihood of greater support for privatized programs like Medicare Advantage.
Electric Vehicle Industry at a Crossroads
The electric vehicle industry is at a pivotal moment, with Trump’s promise to roll back the Biden administration’s EV policies on “day one” having significant implications. On the other hand, Harris has been supportive of the current administration’s efforts to expand access to EVs.
Homebuilders Could Benefit from Harris’s Housing Plan
Harris’s promise to support the housing market and make home affordability a centerpiece of her economic agenda is a bullish sign for homebuilders. Oppenheimer sees Harris’s plan to build three million new housing units and improve housing affordability as a key catalyst for the sector.
Off-Price Retailers Could Thrive Under a Harris Administration
More social support under a Harris administration will boost off-price retailers, according to Evercore’s Michael Binetti. Burlington Stores has the lowest income demographics and a bigger margin opportunity than Ross Stores.
As the election draws near, investors are advised to buckle up and prepare for a bumpy ride. One thing is certain – the outcome of this election will have significant implications for business and Wall Street.
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