The U.S. presidential election has global investors on edge as they await the results of the closely contested race between Republican Donald Trump and Democrat Kamala Harris. The outcome could have significant implications for tax and trade policy, as well as for U.S. institutions and industries. Polls show a dead heat between the former president and the current vice president, with control of Congress also at stake.
Investors are wary of any unclear or contested result that could fuel volatility stemming from lasting uncertainty about the political backdrop. As votes start to be reported on Tuesday evening, investors will focus on tallies from bellwether counties across the country that could provide early clues about the winner. However, many battleground states may not have meaningful results until at least late at night.
This is the most significant election that I have seen in my career,” said Mike Mullaney, director of global markets research at Boston Partners, who has worked in investment management for over 40 years. Bets on the election outcome have already swayed markets. Trump’s gains in polls and betting markets have driven assets that could be influenced by his pledges to raise tariffs, cut taxes, and decrease regulations.
These “Trump trades” include tumbles in the Mexican peso, wild swings in the shares of Trump Media and Technology Group, and rallies in industries that could benefit from looser regulation, such as regional banks. A Harris presidency, meanwhile, is expected to result in tougher regulations, more support for clean energy, and potentially higher taxes on companies and wealthier individuals.
Investors await election results anxiously
However, both candidates would likely need their respective parties to win control of Congress to alter tax rates. A “Blue Wave,” where Harris prevails and Democrats gain control of both the House and Senate, is considered unlikely by most investors. Historic data shows that stocks tend to perform well at the end of election years regardless of which party wins, as investors embrace clarity about the political situation.
However, some investors are concerned that the result will be too close to call this year, increasing uncertainty for markets. Another worry is that the election will be contested, similar to Trump’s efforts to overturn his loss to President Joe Biden in 2020. The last major contested election in 2000 between George W.
Bush and Al Gore resulted in a 5% slump in the S&P 500 during the month-long recount in Florida. U.S. stocks ended lower on Monday ahead of the election, with the Dow Jones Industrial Average falling 257.59 points, the S&P 500 slipping 16.11 points, and the Nasdaq Composite dropping 59.93 points. Bond yields also slid, with the 30-year Treasury yield falling 6.4 basis points to 4.495%, its largest one-day decline in two months.
Despite these concerns, some strategists suggest that potential delays in vote counting would likely have little long-term impact on stock prices beyond a brief period of volatility. They emphasize that the Federal Reserve’s upcoming policy meeting will refocus investor attention on interest rate expectations and the economic outlook for 2025.
