Buckle up.
That’s the message from Wall Street pros as investors brace for a close 2024 presidential election.
So far this year, the S&P 500 (^GSPC) is up 20%, making 2024 the best election year through October since 1936. But that outperformance could be in jeopardy, at least in the short term, because the index is too close at the elections. The call race is expected to largely lead to market volatility.
Market Predictions Polymarket currently shows a 59.5% chance that Donald Trump will win the election, which has led to a return of the so-called Trump trade. Treasury bonds fell and gold rose again last week as investors bet that Trump’s proposed policies on tariffs and tax cuts could prove inflationary.
“The key for the markets will be certainty about the outcome, from which we can understand the economic impact and evaluate the implications for the economic growth trend, and assess the winners and losers of the sector,” says Rob Haworth , senior investment strategist at US Bank Wealth Management, told Yahoo Finance.
Given the key themes emerging from Trump and Harris’ respective campaigns, I asked some strategists what a Republican versus Democratic presidency means for business and Wall Street and narrowed that list down to three trade ideas for each scenario.
Financial services are seen as a top sector under a Republican presidency due to expectations of looser regulations and more mergers and acquisitions.
According to a recent note from Fitch Ratings, a July 2021 executive order under the Biden-Harris administration encouraging greater scrutiny of mergers has hampered deal activity — guidelines that are expected to change under Trump.
“While no proposed mergers have been formally rejected since the Directive came into force, approval times have increased significantly and in some cases to the point where deals have become unviable as market conditions changed during the assessment period,” said Christopher Wolfe, head of the company. of North American banks for Fitch Ratings, wrote in a note.
Kurt Reiman, co-leader of UBS Global Wealth Management ElectionWatch, told me that the financial sector stands out as a “major beneficiary” in both a Red sweep scenario (meaning Republicans control the White House, Senate and House of Representatives). control) as a Trump presidency with a divided Congress.
Reiman said a looser regulatory environment could lead to lower costs and a greater ability to return capital to shareholders, as well as a greater likelihood that consolidation in the financial services sector would meet less resistance.
On the other hand, Reiman and his team see Democrats controlling the White House, Senate and House of Representatives as a “worst-case scenario” for financial services, in part because of the likelihood of greater support for the Credit Card Competition Act – a bill that he positions that will usher in new regulations and stricter interpretations of current rules.
