MARKETS AND THE US PRESIDENTIAL ELECTION

25.09.2024 With the US Presidential election less than two months away I look at the potential market impact below.

Since taking over the Democratic nomination from Joe Biden, Kamela Harris has built up a small lead, of around three percentage points in the opinion polls, over Donald Trump. Polls also suggest that she has a small lead in the swing states, of the electoral college, that determine victory in the Presidential election.

Kamela Harris largely represents a vote for a continuation of the current policy regime. She has some additional policies aimed at meeting voter concerns on the cost of living. For instance, she aims to build more houses to alleviate a burgeoning housing shortage while she plans to raise corporation tax and cut taxes for middle and low income Americans.

A Trump victory would be more controversial. The centre piece of the Trump platform is a plan to fund a cut in taxes with a universal tariff on US imports. The effect of this would tend to raise inflation and interest rates while slowing growth. However, to implement this he would likely also need to gain control of Congress via a sweeping victory. At present the opinion polls suggest that this is unlikely.

One issue which neither candidate has shown a willingness to address is the size of the US budget deficit. This is currently 6% of Gross Domestic Product. While global markets seem happy to fund this at present they may be less relaxed in the future about it. So, it will likely remain a medium-term risk for markets.

The forthcoming US presidential election will be a major market event. As discussed above most outcomes seem likely to have limited medium term impact. The only exception is a sweeping Trump victory which the polls suggest is rather unlikely at present.

● For information only. Investors should seek professional advice for their own circumstances before making an investment.

Categorised in: Uncategorised

This post was written by Robin