The US presidential election is just around the corner, and while everyone is focused on Trump vs. Harris, financial markets may not care much.
According to the latest NBC News poll, Trump and Harris are neck and neck, but investors aren’t betting on the election much. In fact, many say the market is already pricing in a Trump win, and perhaps even a Republican victory outright.
Investors are skeptical
Stocks have had a good year, with the S&P 500 up 22% and the Dow and S&P posting their best six-week gains this year. Even historical data suggests the market is doing well after a strong run leading up to the election.
According to Sam Stovall, chief strategist at CFRA Research, there is usually “additional improvement” in November and December when this happens.
But let’s be clear, history guarantees nothing, and some investors are closely watching sectors like telecoms, financial services and information technology to drive growth. Consumer staples, materials and energy? Not so much.
Let's get one thing straight. Investors have learned not to bet too much on election promises when it comes to market performance.
Remember Trump’s win in 2016? People thought energy stocks would rise, but the sector underperformed. Same with Biden’s push for renewable energy in 2020. It didn’t pan out as expected.
But investors shouldn’t even focus on politics. Although there is some hope that if Harris wins and we get a divided Congress — Democrats in the House and Republicans in the Senate — that could be good for stocks.
Why? Because nothing is going to pass, especially no corporate or individual tax increases. And if this year is anything to go by, when stocks go up, bitcoin goes up.
Now, if Trump wins, the stock market might cheer, but it could raise questions about trade. Trump wants to impose 100% tariffs on the world, and that could ruin global trade. Tariffs slow economies, and that’s bad news for cryptocurrencies.
Late election results could mean big swings
Is there a major risk looming over the election? Delay. If the outcome is very close, we may have to wait a while. This kind of uncertainty is a breeding ground for market volatility.
A late result is very likely, says Morgan Stanley’s Monica Guerra. With tight races and mail-in ballots slowing down the count, we could see days, or even weeks, before we know who the winner is. That would send volatility skyrocketing.
After the 2020 election, the volatility index on the Chicago Board of Trade rose 40% for three days until Biden was declared the winner. In 2000, during the Bush-Gore scandal, volatility lasted more than 30 days, throughout December.
Investors are encouraged to keep their long-term goals in mind and prepare for some market volatility around the election. “We encourage investors to keep their long-term goals in mind during periods of uncertainty and positioning for election-related volatility,” Guerra said.
But the reality is that some investors aren’t waiting for clarity. They’re already positioning themselves for a year-end rally. Baird is telling investors to “lean into the uncertainty” and take risks in high-growth sectors and assets.
Bitcoin and Cryptocurrency Markets With Elections
Over the past week alone, Bitcoin has surged 9%, reaching nearly $69,000 before pulling back to settle near $67,000. Year to date, Bitcoin is up 59%, defying market expectations amid the uncertainty.
Institutional money is the main reason behind this. Spot ETFs have attracted more than $20 billion in inflows, with $1.5 billion coming in just last week. It’s the fastest growth in ETF history.
Trump is seen as a pro-crypto candidate. He has talked about building a strategic reserve of bitcoin and easing regulations if he wins.
Betting markets have already set the odds on Trump winning at 60%, and investors are piling into cryptocurrencies, anticipating favorable policies under a second Trump term.
But Harris isn’t anti-crypto either. In her own way, she’s promised a clearer regulatory framework. But it’s not just about the election. Broader economic conditions play a big role in driving Bitcoin’s price action.
Central banks around the world are easing monetary policy, which is a boon for riskier assets like cryptocurrencies. Interest rate cuts by the Federal Reserve and easing measures by China have paved the way for higher returns in volatile assets like Bitcoin.
The market is showing remarkable resilience, with Bitcoin rebounding from the sell-off fears linked to late payments from the collapse of Mt. Gox and FTX. At the time of publishing this article, Bitcoin was worth $67,402.
