Arun Sai, Senior Multi Asset Strategist, Pictet Asset Management, writes that as the US presidential election approaches, markets have remained relatively calm, with attention focused on other global economic concerns including growth scares, the start of the US easing cycle and China’s stimulus.
However, as the election nears, investors should begin to assess the potential impacts on specific assets. While fundamentals generally drive market direction, the results of the election—especially considering control of Congress—could lead to nuanced shifts in markets.
Election Impact on Asset Classes: A Trump presidency could benefit US equities but hurt government bonds, while a Harris victory might favour emerging market assets and affect the US dollar negatively.
Congressional Control Matters: The balance of power in Congress is crucial, with different market effects depending on whether either candidate secures a divided or unified government. For example, a Republican Congress under Trump would push more aggressive fiscal and trade policies, impacting inflation and bond yields.
Moderate Market Responses Expected: Markets are likely to see more muted responses this election cycle compared to 2016, partly due to limited fiscal room for drastic policy changes and investor caution. However, asset-specific trades, such as gold and equities tied to US domestic policies, will still be influenced by election outcomes.
