The Impact of the US Election on Financial Markets

As the US presidential election approaches, financial markets brace for possible shifts that could influence a wide range of assets. Investors are closely watching how a Trump victory might affect the “Trump Trade,” which has previously impacted the US dollar, precious metals, and cryptocurrencies. However, the market’s response seems rooted more in uncertainty than in any specific policy predictions.

Currency Trends Shaped by US Economic Performance

The global outlook remains heavily impacted by the upcoming election, with betting markets leaning toward a Trump victory. Analysts suggest that proposed tariffs by Trump, including a 60% tax on Chinese goods. That could push US prices higher, prompting the Federal Reserve to raise interest rates. This may place additional pressure on other global currencies, particularly the euro.

While some believe a Trump victory could drive the euro towards parity with the dollar. Others argue that the dollar’s recent strength is due to broader economic trends. The US third-quarter GDP growth rate of 2.8% has signaled a “soft landing” scenario. Minimizing the likelihood of further aggressive Fed rate cuts. As such, broader economic forces are likely to drive the euro’s long-term trajectory. Even if a Harris win sparks a temporary rebound.

Potential Impacts of a Trump Administration

If Trump wins, new uncertainties may emerge for European economies, especially in sectors affected by his tariffs and climate policies. For example, the “Trump Tariff” could impact European carmakers, particularly in Germany, where export reliance is high. The mining and industrial sectors could also be affected if Trump revokes exemptions on European steel and aluminum tariffs.

On the other hand, the oil and gas sector might benefit under Trump’s administration. As he could ease emissions regulations, favoring fossil fuel companies such as Shell and BP. However, increased US production might lower global oil prices, affecting profit margins.

Harris and Potential Continuity in Existing Policies

In contrast, a Harris administration might extend policies from Biden’s Inflation Reduction Act (IRA), focusing on climate and energy while indirectly disadvantaging European automakers. Additionally, banking stocks may continue to benefit from a high-interest-rate environment if inflationary pressures rise. But significant deregulation under Harris seems unlikely, suggesting that financial regulations will likely remain steady.

Conclusion: What’s at Stake for Investors?

Regardless of the election outcome, market trends in currency, commodities, and stocks will likely be influenced by a mix of political and economic factors. Investors should remain vigilant as they monitor how each candidate’s policies could shape the financial landscape across sectors.