Trump or Kamala?

As the 2024 U.S. presidential election approaches, markets prepare for potential economic policy, regulation, and global relations shifts. Historically, U.S. elections bring a wave of uncertainty, often resulting in heightened volatility across various asset classes like stocks, bonds, and crypto. Let’s explore how markets have historically behaved during U.S. elections and what we might expect under either a Kamala Harris or Donald Trump presidency this time.

Historical Market Behavior During U.S. Elections

1. Stocks: Historically, U.S. stock markets tend to be volatile leading up to elections due to uncertainty about future policies. However, once the election results are clear, markets typically rally, regardless of the winner. The S&P 500 has averaged a 6.5% gain in election years since 1928. In general, markets favor pro-business, deregulation-friendly candidates, but stability and certainty are equally important for investor confidence.

2. Bonds: Bond markets tend to be sensitive to fiscal policy and inflation expectations. During election years, if candidates propose heavy spending plans, bond yields can rise due to concerns about increasing government debt. Conversely, more fiscally conservative candidates who promise spending cuts or balanced budgets tend to ease these concerns, resulting in stable or lower yields.

3. Crypto: Crypto has yet to go through many U.S. elections with significant market size, but recent trends show that regulatory clarity is critical for crypto market behavior. Candidates with strong stances on regulation (either for or against crypto) can significantly impact market sentiment. 

Kamala Harris Presidency: What It Means for Markets

If Kamala Harris wins, we can expect continuity with many of the Biden administration's policies, which have focused on economic recovery, infrastructure spending, and climate initiatives. Stock sectors like clean energy, technology, and infrastructure could benefit significantly from expanded federal investments in renewable energy and digital infrastructure. Harris is likely to continue the Democratic approach of heavy spending, which could lead to higher bond yields due to concerns over government debt. Climate bonds and other green financing could become more prominent under her presidency. Harris has not taken a strong public stance on crypto regulation, but we could expect more regulatory scrutiny under her administration. Given the Biden administration’s cautious approach to crypto, a Harris presidency could see further regulatory tightening, suppressing the crypto market.

Donald Trump Presidency: What It Means for Markets

A Donald Trump win would signal a return to the policies of his first term, which focused on deregulation, tax cuts, and a more aggressive stance on global trade. Stocks could respond positively to a Trump victory, particularly in sectors like energy, financials, and manufacturing, which benefited during his first term. Trump’s willingness to expand deficits through tax cuts could push bond yields higher, though his administration's aversion to large-scale government spending could keep a lid on bond yields. Trump has positioned himself to be pro-crypto. In July, at a major crypto conference in Nashville, Tennessee, Trump declared that he wants the U.S. to become the “crypto capital of the planet” and the Bitcoin “superpower of the world.” His proposed policies on crypto are favorable, which would help support crypto prices under a Trump presidency. 

Conclusion

As the 2024 election draws nearer, markets will likely experience typical pre-election volatility. Whether Kamala Harris or Donald Trump wins, there will be a direct impact on stocks, bonds, and crypto. Harris’s presidency would likely see more regulation and government spending, benefiting clean energy and infrastructure sectors. Trump’s presidency, on the other hand, would likely boost sectors tied to deregulation, tax cuts, and crypto. As of October 17th 2 PM EST, Polymarket indicates that Trump has a 61% chance of winning the election, up from about 50/50 in the beginning of October. Regardless of who wins, investors should brace for volatility but also be aware that the post-election period has historically been a time when markets stabilize and, in many cases, rally.