In 2024, America goes to the polls for the US presidential election. Traders worldwide will closely follow this election because of the outsize impact of the American economy on global markets. Read more about how past elections have impacted the financial markets and how to prepare your portfolio this year.
Donald Trump has won the election and will be the 47th US president. Trump is on track to win a significant majority both in the national popular vote and the electoral college, winning key swing states including Georgia, North Carolina, and Pennsylvania.
For the last month or so Democrat Kamala Harris has retained a narrow national lead, but swing state polling indicates a knife-edge result.
Vice presidential debates do not typically have a big impact on the outcome of the election, nor on markets. But 2024 may be different.
Should Harris win, or polling numbers diverge to the point where her victory seems likely, the most significant market impact will be the unwinding of the Trump trade.
Two important risk management techniques for trading during the US presidential election are using stop losses and diversification.
Trump trade policy for 2024 is hardline: a 10% tariff on all imported goods, and a 60% tariff on goods imported from China.
On September 10th, Kamala Harris and Donald Trump debated in Pennsylvania, clashing over immigration, inflation, the economy, and personal character, setting the stage for a heated presidential race.
The performance of oil in election years is complicated. Oil is a volatile industrial commodity, and prices are influenced by economic expectation and political risk as well as supply and demand.
Historically, gold prices have shown a tendency to increase during Democratic presidencies and remain stable or decline during Republican terms.
The choice of US president impacts global markets, and their policies or policy preferences are important in shaping the fortunes of individual stocks and stock sectors.
Each election takes place in a unique historical context. The stock market of 2024 is not the same as it was in 2020, much less in 2008, and making predictions from past events is notoriously unreliable.
The 2024 Presidential Election is looking close. Though there is plenty of time for polls to change, the political uncertainty has coincided with a US stock market sell-off, and jitters amongst US equity traders are rocking the stock market.
Traders and analysts debate how much politics affects markets. Significant changes to the political landscape cause market movements across asset classes, but routine election results or the continuation of the status quo have little to no long-term impact.
On 5 November, the US will go to the polls to elect their next president. Traders worldwide will be watching closely, as markets price in expected policy changes and economic disruption from the potential result.
In what is already one of the most dramatic Presidential election campaigns in living memory, President Joe Biden announced his withdrawal from the race and endorsed Vice President Kamala Harris to take on former President Donald Trump.
The US stock market is the most obvious market influenced by presidential elections. In particular, equity traders are interested in the likely winner’s impact on tax rates, trade policy, the Federal Reserve, and financial regulation. Candidates from the mainstream of both parties are normally seen as more ‘pro business’, and historically the S&P500 has performed better in years when a Republican was elected than a Democrat. (These are averages based on almost a century of presidential results, so may not apply to any single future election).
International stock markets also react to US election results, with key trading partners of the US (China, the EU, Mexico and Canada) following a similar pattern to the US market. Specific industries sometimes react to special issues discussed in election years; for example US health insurance stocks saw massive losses in 2016, as Obamacare insurance reforms were expected to be repealed.
Amongst other markets, the most important is FX. The 2012 presidential election was seen as a strong positive for the Mexican Peso, given the result was expected to reinforce a trade policy of maintaining deficits with Mexico, while the 2016 result was a catastrophe for the Peso, with very sharp declines due to an expected reversal of the same policy.
The US dollar tends to strengthen under protectionist trade policies, which was the expected (and partially realised) impact for Donald Trump currency markets in 2016, while when the US focuses on imports and grows its trade deficit the dollar often weakens. Protectionism is not consistently linked to a single party, free trade a consensus among Democrats and Republicans from the 1990s to the 2010s, but in certain elections becomes a major political issue. It is these elections that see an outsized impact on the currencies of the US and its main trading partners.
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Volatility around presidential elections gives opportunities to CFD traders, but can easily catch out the unwary. Most election results come in close to polling averages when the margin of error is taken into account; market movements in the run up to an election happen when traders prepare for the expected result. To trade around an election successfully you need an idea of what assets will out or underperform for each possible result, and to time trade entry and exit.
The key moments of stock volatility come the day after the election, since preliminary results start coming in after market close. By contrast, FX markets allow you to live trade the entire election, as they run through the night, usually seeing a combination of high trading volumes and high volatility. FX trading around elections requires a detailed understanding of trade policy; FX movements are more complicated and less linked to a simple Democrat – Republican binary than with the stock market.
Polling indicates Donald Trump has a good chance of winning the 2024 presidential election, but there is no guarantee this will result in the same market reaction as 2016. The US economy and Trump will both be analysed to a Republican presidency’s likely impact on future economic growth, trade policy, and geopolitical stability, as traders come to individual decisions on how to hedge their portfolios. Markets responded positively to both Trump’s 2016 and Biden’s 2020 election victories, so it is hard to predict their response to a rematch. The most important thing is for traders to remain well informed about the issues debated in the election, positions of candidates, and current polling’s indication of who might win. Finally, whatever the result, volatility around elections is normal and traders should ensure their risk management is up to the task.
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When will the next US presidential election take place?
The next US presidential election is scheduled for 5 November 2024.
How do presidential elections impact financial markets?
Presidential elections often cause increased market volatility as traders anticipate different outcomes based on polling and recent events. Market reactions can vary, with past elections like 2016 and 2020 leading to new stock market highs, while others, like 2012, saw significant declines in certain sectors. In the long-term, the market impact of presidential elections is limited.
Why trade the US elections with ADSS?
ADSS offers CFD trading on key instruments affected by the US elections, offering our clients the ability to go long or short on US equities and major FX pairs, with 24/5 trading support.