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 might these fundamentally different political strategies affect currency, commodity or equity markets ? And how can investors take advantage of the expected market changes? In this article, we will look at the main market impacts we can expect, as well as potential strategies to prepare for this period of volatility.
You can also find more information in the XTB analytical report American elections through the eyes of an investor and the XTB live broadcast tonight from 1:00.
Trump's agenda and its potential impact on key markets
Trump's return to the scene brings an old-new vision for America: supporting traditional industries, cutting taxes, and tightening trade rules . His 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)
ProA tectonic approach can strengthen the dollar by reducing 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 strongly to changes in trade policy and global uncertainty.
The Harris agenda and its potential impact on key markets
Kamala Harris brings stability and continues the course set by Joe Biden, with an emphasis on sustainability, innovation, and environmental responsibility . Her approach will impact the following sectors:
- Renewable energy sources
Investment in green energy could significantly boost the solar and wind energy markets and attract interest from companies like 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, which is heavily focused on technology, could benefit from this development as well as 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. Expanding healthcare could help the S&P 500 sector Healthcare and bring new opportunities for companies focused on health technology and pharmaceuticals.
What does historical data tell us about pre-election volatility?
Historically, elections have increased market volatility . Data shows that before an election, there is a significant drop in volatility, as measured by the VIX index , which can last until the end of the year. During this period, the market tends to be less dynamic, which creates opportunities for traders: over the past nine years, the S&P 500 has risen by more than 3% on average 75% during this period.
Source: Seasonax.com, S&P 500 and VIX volatility index during the 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 also increase the budget deficit. Criticism of the Federal Reserve and a push for a weaker dollar could support U.S. exporters. Harris, on the other hand, could adopt a more stable approach with lower tariffs and more open trade policies , which could lead to a more stable or stronger dollar.
Historically, the dollar has performed best 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, the EUR/USD pair has not shown a clear trend during election years, but higher volatility is a common occurrence that investors should expect. For example, the dollar weakened after the 2000, 2004, 2008, and 2012 elections in response to the economic crises of the time.
According to Bank of America analysts, a bearish trend is emerging in the US dollar index (DXY) in 2024, which could mean a drop in the dollar to the level of 96,00. In futures markets, there has been a significant increase in short positions on EUR/USD since May , which may indicate further weakening of the dollar.
Japanese only during uncertainty
USD/JPY is another pair that will be affected by the election. The yen is considered a safe haven 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's stabilizing policies, on the other hand, could cause it to fall. Bank of America analysts point to the possibility of higher demand for silver in the event of an economic recovery, while gold remains attractive at historical maxname.
Source: Tradingview.com, Forex.com, Gold Price Development
Oil (WTI) and its sensitivity to politics
The development of WTI oil prices will be influenced by the next president's approach to energy policy. Trump's support for fossil fuels could lead to a decline in prices due to increased production, while Harris could push through environmental measures that limit oil demand, which could in turn increase prices. Oil is currently waiting for 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 industrials and energy in the short term, while Harris could boost technology stocks , which could have a positive impact on the Nasdaq. Historical data suggests that unexpected election results or long delays in counting votes can cause significant volatility, while clear results support 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.
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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 around the world. Pro 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.
Are you considering further information? The XTB analytical report The American Elections through the Eyes of an Investor offers a detailed overview of possible market development scenarios. In addition, you can watch a continuous stream on YouTube at night , where XTB brings current events directly from the elections today from 1:00 AM.
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