US elections: uncertain scenarios and impact on financial markets
With just a few weeks remaining before the US presidential election, the suspense is at its peak. The race for the presidency is tight, the battle fierce and divisive, and the polls are not pointing to a clear winner. In this context, investors and savers need to understand the various potential scenarios and their possible impact on the economy and financial markets. This article will explore these aspects.
Possible scenarios and their political implications
Currently, four main scenarios are being considered: a Republican sweep (a takeover of all branches of government), a victory by either Donald Trump or Kamala Harris with a divided Congress, and finally, a complete Democratic victory. These scenarios have significant political implications, particularly concerning control of Congress, which plays a crucial role in enacting the President's policies (many of which are tied to campaign promises).
Impact on the Economy and Markets
US elections have always had a considerable influence on financial markets and the broader economy. In the event of a Republican sweep, inflation and interest rates could be particularly affected. Regardless of the election outcome, we are likely to see a steepening of the yield curve (with short-term rates falling more sharply than long-term rates).
Election years typically coincide with rising stock market indices and heightened market volatility. However, with the race so close, it is difficult to pinpoint which sectors would benefit most from any particular outcome.
It’s important to remember that the economic cycle plays a more significant role in market performance than election results. For instance, under Donald Trump’s presidency starting in early 2017, the sectors that performed best a year after the election were financials, technology, and consumer discretionary.
Opportunities to seize
Regardless of the election result, opportunities are already emerging at this stage. For example, capital-protected solutions allow investors to position themselves for a potential steepening of the US yield curve. On the equity side, the US small and mid-cap segment could benefit from the Federal Reserve’s ongoing rate-cutting cycle.
The race for the US presidency remains tight, and the impact on the economy and financial markets remains uncertain. While the focus on the election will continue to grow until its conclusion, a more global approach—one that takes cycles and fundamentals into account—is advisable. It is crucial to stay informed and be prepared to act if developments significantly impact the economic and financial environment.
How does your investment strategy account for the uncertainties surrounding the US elections? Are you ready to seize opportunities and protect yourself from underlying risks? Our advisers are here to guide you through these uncertain times with peace of mind.
Investment Strategy Webinar
Join us for our next Piguet Galland webinar "Investment Strategy, 4th Quarter 2024" on Wednesday, November 6, 2024, at 11:30 a.m.Please note that the webinaire will be held in French.
