The day is finally here. After a contentious US presidential election campaign, marked by an assassination attempt against former President Donald Trump and the late entry of Vice President Kamala Harris, US citizens will cast their vote and select their next leader. Meanwhile, markets are showcasing a wait-and-see approach.
On Tuesday morning, stock futures showed little movement, given the expectation of an extremely tight result, which might not be announced until later in the week. Futures tied to the Dow Jones Industrial Average gained 45 points, while S&P 500 and Nasdaq-100 futures hovered around the flatline.
The previous day’s trading session closed lower, reflecting market caution amidst election uncertainty. The Dow dropped over 250 points, or 0.6% and both the S&P 500 and Nasdaq Composite fell by approximately 0.3%.
Currently, Asian markets are experiencing minimal movement, as investors await for more clarity on the outcome of the US election. The MSCI’s broadest index of Asia-Pacific shares outside Japan remained flat, while Tokyo’s Nikkei index, returning from a holiday, rose by 1.3% in morning trading. S&P 500 futures edged up slightly, by 0.1%.
The dollar, which saw an overnight decrease, as traders adjusted their positions, was at 152.35 yen and $1.0875 per euro. Citi currency strategists suggest selling dollar/yen and buying AUD/USD if Harris wins and buying USD against EUR, SEK, and NOK in the case of a Trump victory.
Oil prices maintained their sharp overnight gains due to delays in production increases, with Brent crude futures standing at $75.08 a barrel, marking a 3% rise since Monday. Bitcoin remains stable at $67,924.
In addition to election developments, investors are anticipating the Federal Reserve’s rate decision on Thursday. Federal Reserve Chair Jerome Powell is expected to provide insights on future policy directions, amid expectations from traders of a 98% likelihood of a quarter-point rate cut. As a result, treasury markets priced 10-year U.S. yields at 4.30%.
The election results could greatly influence stock market performance by year-end, though investors may need to prepare for short-term volatility. Historical data from CNBC, dating back to 1980, shows that major indexes typically rise between Election Day and the year’s end but often drop in the immediate session and week following the election.
“Ultimately the U.S. election comes down to this – whether the U.S. electorate wants to vote for economic policy continuity, institutional stability and liberal democracy (Harris) or radical trade policy, a further retreat for globalization and strongman democracy (Trump),” J.P. Morgan analysts said. “In short, a vote for stability or change.”
Nonetheless, the rest of the year is set to be marked by uncertainty. mirroring the tense months between the 2020 vote and Joe Biden’s January inauguration. Furthermore, Trump has signalled that he will attempt to fight any defeat, as he did in 2020.
