As investors eagerly anticipate the upcoming U.S. election on Tuesday, let’s examine the data reflecting market sentiment during the two most recent US. presidential election.
Presidential Election 2016: Trump vs. Clinton
In 2016, the U.S. presidential race was between Donald Trump and Hillary Clinton. The election brought surprises as Donald Trump defied poll expectations.
Gold prices at the time remained steady, and the USD strengthened. However, when Trump unexpectedly took the lead and ultimately won, the financial markets shifted nearly “180 degrees.”
During Asian trading hours, while the U.S. stock markets were closed and only derivatives were trading, the Dow Jones, Nasdaq, and S&P 500 fell sharply. Following this, when the markets reopened – on the day Trump assumed office – U.S. stocks dipped at the start but rebounded sharply by the end, surpassing prior peaks. Additionally, various markets, including precious metals and commodities, saw positive growth to varying extents.
Presidential Election 2020: Biden vs. Trump
The 2020 presidential election began with initial uncertainty, as Trump’s stronger-than expected showing created a tighter race than anticipated.
This sentiment was further fueled when Pfizer announced an effective COVID-19 vaccine right after election day, boosting market optimism and risk asset values.
Despite this, markets surged when it became clear Biden would win, driven by hopes that a divided government might limit changes to regulations and taxes.
Dow Jones, Nasdaq, S&P 500, and markets for precious metals, commodities, and currencies all followed an upward trend post-election.
2024 Market Projections
Examining historical trends from 2016 and 2020, it appears most asset classes tend to rise around Election Day, then settle as results are finalized.
For the 2024 election, two scenarios emerge. If Vice President Kamala Harris wins, her policies may align with the current administration’s, likely limiting rate cuts and reinforcing USD stability, which would benefit USD-sensitive assets.
On the other hand, if Donald Trump is elected, the outlook may be different. Since earlier this year, he has frequently called for Fed rate cuts and even stated, “If I win, I won’t reappoint Fed Chair Jerome Powell.” This suggests that a Trump victory could usher in a period of USD weakness.
Looking at the last two elections and the potential scenarios, how do you think the market will react if either of the two candidates wins? What’s your take on how interest rate policies and the U.S. dollar might affect investment portfolios?
