Jiří Filip The 2024 US presidential election promises more than just a battle between two candidates – it's an opportunity for investors to explore possible opportunities and risks in global markets. On the one hand, the former president Donald Trump, which comes with policies focused on tax cuts, protectionism and fossil fuels. On the other hand Vice President Kamala Harris, which continues the progressive agenda of green energy and innovation support.
How these fundamentally different political strategies can influence currency, commodity or stock markets? And how can investors take advantage of the expected market changes? In this article, we will look at the main market impacts that we can expect, as well as the potential ones strategies to prepare for this period of volatility.
More information can also be found in the XTB analytical report American elections through the eyes of an investor a XTB live broadcast tonight from 1am.
Trump's agenda and its potential impact on key markets
Trump's return to the scene brings an old new vision for America: support for traditional industry, tax cuts and stricter trade rules. Its approach has a clear impact on several important markets:
- Energy sector (oil and natural gas)
A bet on fossil fuels and deregulation may spark the US energy market. It is expected that increased US oil production could lower global prices of the commodity, affecting not only US energy companies, but also WTI crude oil prices, which could face an oversupply. - Industrial sectors
Trump's reimposition of tariffs on imports from China and the EU has the potential to boost domestic manufacturing and industry, potentially benefiting sectors such as steel, construction and the automotive industry. However, higher prices for imported raw materials could also mean higher costs for American manufacturers. - US Dollar (USD)
A protectionist approach may strengthen the dollar by curbing imports and increasing domestic demand, but an increased deficit from lower taxes could cause the dollar to weaken. Key currency pairs such as EUR/USD and USD/JPY can react significantly to changes in trade policy and global uncertainty.
The Harris agenda and its potential impact on key markets
Kamala Harris brings stability and a continuation of the course set by Joe Biden, with an emphasis on sustainability, innovation and environmental responsibility. Its approach will affect the following sectors:
- Renewable energy sources
Investments in green energy could significantly boost the solar and wind markets, attracting interest from companies such as Tesla or NextEra Energy. However, reduced demand for fossil fuels could cause oil and gas markets to weaken. - Technology sectors
Support for innovation and research, especially in the area of reducing carbon emissions, could strengthen technology companies. The Nasdaq index, which is heavily focused on technology, could benefit from this development and from government incentives aimed at green energy developments. - Healthcare sector
Healthcare reforms aimed at reducing drug costs and improving access to care could positively impact healthcare companies. The health care expansion could help the S&P 500 Healthcare sector and bring new opportunities for companies focused on health technology and pharmaceuticals.
What does historical data tell us about pre-election volatility?
Historically speaking, elections increase market volatility. The data shows that there is a significant decrease in the volatility measured by the index before the election VIX, which may last until the end of the year. During this period, the market tends to be less dynamic, creating opportunities for traders to: over the past nine years, the S&P 500 rose by more than 75% on average 3% of the time during that period.
Source: Seasonax.com, S&P 500 and VIX volatility index in progress US presidential election
How can the dollar change depending on the outcome of the election?
Trump's approach to spending and stimulus could boost economic growth, but it has also increased the budget deficit. Criticism Federal Reserve (Fed) and the pursuit of a weaker dollar could in turn support American exporters. Harris, on the other hand, could introduce a more stable approach with lower tariffs and a more open trade policy, which could lead to a more stable or stronger dollar.
From a historical point of view, it reaches best performance dollar just in election years, while it tends to weaken in post-election years.
Source: www.seasonalcharts.com, Development of the US dollar (USD) and the presidential cycle
What can we expect from the individual instruments?
EUR/USD during the US presidential election period
Historically, it is not possible for a couple EUR / USD during election years to trace a clear development, but larger volatility is a common phenomenon that investors should be aware of. For example, after the elections in 2000, 2004, 2008 and 2012, the dollar weakened in response to the economic crisis at the time.
According to Bank of America analysts A bearish trend is emerging in the US Dollar Index (DXY) in 2024, which could see the dollar fall as low as 96,00. There has been a significant increase in the futures markets since May short positions on EUR/USD, which may indicate further weakening of the dollar.
Japanese only during uncertainty
USD / JPY is another couple that will be affected by the election. Yen is considered a safe asset, and therefore often strengthens against the dollar during periods of political uncertainty. Investors looking to protect capital should keep this pair on their radar.
Gold as a safe haven
Elections often increase the demand for dear as a traditional hedge against inflation and market fluctuations. Trump's protectionism could support its price, while Harris' stabilizing policies could cause it to fall. Bank of America analysts they point to the possibility of higher demand for silver in the event of an economic recovery, while gold remains attractive at all-time highs.
Source: Tradingview.com, Forex.com, Gold Price Development
Oil (WTI) and its sensitivity to politics
Price development WTI oil will be influenced by the next president's approach to energy policy. Trump's support for fossil fuels could lead to a fall in prices due to production growth, while Harris could push environmental measureslimiting demand for oil, which could in turn increase prices. Oil is currently awaiting a recovery in global demand, especially from the US and China.
S&P 500 and Nasdaq stock indexes
US stock indexes are sensitive to election results. Trump's tax cuts could benefit the industrial and energy sectors in the short term, while Harris could support tech stocks, which could have a positive effect on the Nasdaq. Historical data suggests that unexpected election results or a long delay in counting votes can cause significant volatility, while clear results encourage growth.
Source: Tradingview.com, Forex.com, S&P 500 Index Development
Strategies for trading during the election period
So elections undoubtedly bring volatility, and with it the potential for trading opportunities. But how to use them specifically?:
- Combination of VIX and S&P 500 positions: Historically, a combination of being short the VIX and long the S&P 500 has proven beneficial during elections when the indices have reacted oppositely.
- Scalping and short-term trades: Increased volatility supports a strategy of scalping and short-term trades that require careful risk management.
- Portfolio hedging: In anticipation of election uncertainty, it is advisable to use short positions as a hedge against unexpected market fluctuations.
- Sentiment Analysis: Indices like the VIX and trader sentiment surveys (such as the AAII or the Fear & Greed Index) can help traders navigate market sentiment and prepare for different scenarios.
záver
The 2024 US election is more than just a change in leadership – it represents a pivotal moment for global markets, which can affect forex, commodities and stock indices worldwide. For traders who can adapt quickly and manage their risk, these elections present an extraordinary opportunity. Understanding the political and economic context can be the key to success in the markets, no matter how the election turns out.
Considering more information? XTB analytical report American elections through the eyes of an investor offers a detailed overview of possible market development scenarios. Plus you can watch at night continuous stream on YouTube, where XTB brings current events straight from the election today from 1:00.
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