The American elections are coming up. What to expect from the markets if Trump or Harris is elected?

Kamala Harris for the Democrats and Donald Trump for the Republicans. The United States has never seen more different presidential candidates. Depending on who the Americans choose on 5 November, we can expect a different market reaction. Thus, while traders are more interested in increased volatility during the election, investors are more interested in longer-term trends. And that's exactly what we'll be focusing on. So we'll look at what to expect from the stock or commodity markets in the weeks after the election, or what impact the election of Harris or Trump will have on the price of bitcoin and the dollar.

Stock markets

The divergent approach of the two candidates to economic and geopolitical issues has far-reaching implications, especially for stock markets. How does this translate into the values of the S&P 500, Nasdaq or the lesser-known Russell 2000 stock indices?

If Trump is elected

If Donald Trump is re-elected, it is expected that his protectionist policies could boost domestic industry and energy companies. This would benefit industrial and construction firms, arms manufacturers and traditional energy companies.

Smaller companies in the Russell 2000 index could benefit from potential tax cuts. On the other hand, for big tech, Trump's election may not be an unambiguous positive. While tax cuts could help them, Trump's negative perception of some tech giants, such as Google, could lead to attempts to break them up, which would be perceived negatively by the markets. Overall, Trump's return should have a positive impact on the S&P 500, similar to what it did during his first term.

If Harris is elected

The election of Kamala Harris would likely mean a continuation of Joe Biden's current policies, which would lead to a reduction in geopolitical tensions and could support positive sentiment in the markets. Nevertheless, some measures, such as an increase in the corporate tax rate and more pressure to regulate monopolies in the big tech sector, could weigh on US stock markets. Big tech firms represent a large share of the capitalisation of the major indices, so their potential distribution could negatively affect the performance of indices such as the S&P 500. Changes in energy policy could also hurt traditional energy companies, which could come under greater pressure.

Commodity Markets

Gold and oil are among the most popular instruments for both intraday traders and investors. So what to expect from these two staple markets?
 

Commodity markets under the Harris administration

The election of Kamala Harris would likely mean more pressure on green energy investment, but a curb on fracking does not seem likely. The United States will remain dependent on oil, which could mean that oil prices are likely to rise due to potentially limited supply as green policies are phased in. As for gold, its price could rise. However, Kamala Harris would advocate for more stability in the geopolitical arena. This would mean a less pronounced rise in gold than Trump.

Commodity markets under the Trump administration

The election of Donald Trump could bring a boost to domestic oil production, leading to higher supply and potentially lower oil prices. However, his erratic handling of geopolitical conflicts could increase the risk premium in the oil market, which would push prices higher. Gold could also rise significantly under Trump due to the uncertainty his policies and conflicts may bring. Geopolitical tensions under his administration could spur more interest in safe-haven assets like gold, and its price could rise regardless of the outcome of the election, but under Trump this rise could be more pronounced.

Trump as a fan of cryptocurrencies?

Cryptocurrencies are an entirely separate chapter. Donald Trump is trying to play to the strings of their supporters in the months leading up to the election. He profiles himself as a fan of cryptocurrencies and bitcoin. He even let it be known that he would create a national reserve fund in bitcoin. If Trump wins, bitcoin could hit all-time highs. However, the most widely used cryptocurrency may reach those before the election itself. It depends on how Trump's preferences grow.

However, whether Trump is not merely posturing to get the votes of cryptocurrency fans on his side is another debate altogether. We'll leave it up to you to judge. However, it is already clear that Trump rather than Harris is having a more positive effect on the price of bitcoin.

Bonds and the dollar

The strength of the US dollar is a topic that Donald Trump voters in particular are hearing about. But what would be the real impact of his administration and what to expect from the dollar if Harris is elected?
 

What to expect from bonds and the dollar if Trump is elected

Donald Trump's election would likely bring a stronger dollar due to his protectionist policies, higher tariffs and efforts to boost the domestic economy. The geopolitical tensions that Trump's actions could stir up would further strengthen the safe-haven dollar. In addition, Trump's potential pressure on the central bank towards a hawkish policy could lead to higher Treasury yields.

Although Trump has repeatedly criticized interest rate cuts, it is possible that once elected, he would instead push to lower them, which could support equities but increase inflationary pressures, pushing up the dollar and bond yields. A change in Fed governor is also real, which could bring further volatility.
 

What to expect from bonds and the dollar if Harris is elected

Kamala Harris would likely continue the current Democratic policy of higher government spending and public sector job creation. This could lead to a weaker dollar as investors often prefer lower corporate taxes and less government spending.

The approach to geopolitical conflicts would be more stable than under Trump, which would mean less volatility and less demand for the dollar as a safe haven. For Treasuries, a Harris administration would likely lead to lower yields, as monetary policy is expected to be softer than under Trump, with less pressure to raise rates and a preference for more extensive public investment.