As the countdown clock to the 2024 US elections begins ticking towards Election Day, markets are beginning to brace for what is yet to come.
Key Volatility Factors
The sharp differences between Harris and Trump’s policy platforms create an atmosphere of market volatility, as investors may be unsure which sectors will be affected by the outcome of this neck-and-neck race.
In addition to the presidency, control of Congress – both the House of Representatives and the Senate – plays a crucial role in determining policy outcomes and possible market responses. Historically, markets have trended upward during presidential elections, yet analysts suggest that a divided government, in which different parties control the presidency and Congress, could be optimal for market stability.
Understanding underlying market dynamics is critical for those entering the online trading arena, and as the November 5 US elections approach, market volatility is reaching new heights, creating both risks and opportunities for traders. To help you navigate this turbulent landscape, Plus500 offers a wealth of resources through her Trade Academyincluding US election webinars, tutorials, eBooks, analyzes and up-to-date news articles.
These tools provide traders with the knowledge to better understand market dynamics and the potential impact of political developments on their trading strategies. In this uncertain environment, informed traders who understand key concepts and trends may be better positioned to adapt to sudden price movements that could arise from unexpected election results, although trading results are never guaranteed.
The economic issues driving the 2024 elections
The 2024 US elections will bring crucial economic issues to the fore, with tax, trade and energy policies as central themes. Donald Trump has proposed further corporate tax cuts to boost growth, particularly in the manufacturing, energy and technology sectors, which could boost stock markets in the short term but widen federal deficits. Kamala Harris, on the other hand, supports targeted tax incentives for green sectors while proposing higher corporate taxes for social initiatives, which may boost clean energy supplies but hit traditional sectors.
On trade, Trump has revived his stance on tariffs, particularly on China, with the aim of boosting domestic industry. This could benefit U.S. manufacturing but could disrupt technology and consumer goods that rely on international supply chains. Harris’ approach, while less aggressive, would focus on targeted tariffs, supporting US interests without risking major trade conflicts, which could stabilize sectors sensitive to global markets.
Energy policy reflects another stark partisan contrast. Trump advocates expanding fossil fuel production to reduce energy costs and inflation, which would likely benefit traditional energy stocks. Harris’ approach to clean energy aims to boost renewable energy sources such as solar and wind and support sustainability-oriented sectors, although this may have initial cost implications for energy markets.
Potential Market Risks: Volatility, Fed Policy, and Foreign Relations
Market volatility could increase due to changes in trade and energy policies, especially if Trump’s proposed tariffs increase tensions with China. Retaliatory tariffs could hurt agricultural and technology exports, increasing risks in indices linked to these sectors. In contrast, Harris’ more moderate approach could result in more stable markets, which would benefit industries with international exposure.
Monetary policy remains crucial, with Trump favoring lower interest rates to boost growth, risking inflation if the Federal Reserve complies. Harris supports Fed independence and suggests a more stable monetary policy with potential benefits for long-term economic stability.
Foreign relations also play a role, especially with regard to China and other trading partners. Trump’s tariff plans could increase international tensions, while Harris’ approach is seen as less confrontational, benefiting multinational companies and stabilizing revenue streams from abroad, especially in technology and healthcare.
Markets affected by the US elections
In addition to specific economic sectors feeling the impact of election season volatility, certain corners of the market are also seeing ups and downs:
Forex and USD
The performance of the US dollar has fluctuated under different administrations, and the stakes are high this time. A Republican victory could send the dollar surging, fueled by aggressive trade policies and rising interest rates, potentially strengthening it against the euro. On the other hand, if a Democrat takes over, analysts predict a softer dollar due to reduced fiscal expansion and falling real interest rates, which could benefit the euro in the future. EUR/USD couple. As election day approaches, volatility may increase, including on platforms like Plus500.
Raw materials
The raw materials market is already making waves. Rising geopolitical tensions, especially in the Middle East, are already impacting oil prices, and further escalations could tighten supply routes such as the Strait of Hormuz, potentially pushing oil prices up sharply. Precious metals, traditionally seen as safe havens, may attract risk-averse investors amid election uncertainty. If post-election policies signal increasing government spending or inflation concerns, metals like gold and silver could see higher demand, boosting their role as hedges in uncertain times.
With all the above shifts underway, there are unique opportunities to trade the changing political landscape through OTC products on specific indices available on Plus500. In particular, these indices reflect the expected impact of party control on different sectors, allowing for diverse trading strategies.
- The American Democrats in Power Index (BUDIPI) tracks companies poised to thrive under democratic governance. This index is weighted by free-float market capitalization, meaning larger companies have greater influence. Investors can focus on sectors such as clean energy, healthcare and technology, which are expected to benefit from policies likely to be enacted by a Democratic administration.
- Conversely, the US Republicans in Power Index (BURIPI) targets companies expected to benefit from Republican leadership. The BURIPI index includes companies in the energy, defense and financial sectors and reflects potential tax cuts, deregulation and increased military spending that could result from a Republican victory.
- Moreover, traders can use the Trumpnomics Index (BTRUIN)which specifically tracks companies that are able to flourish under former President Trump’s economic policies. This index reflects the performance of companies in sectors such as fossil fuels, manufacturing and infrastructure, which Trump has historically supported.
Riding the volatility wave
Leading up to Election Day, the potential for market volatility presents exciting trading opportunities and associated risks. With access to a wide range of OTC tools and learning resources, Plus500 empowers traders to potentially better navigate the uncertainties and ride the waves of uncertain global markets.
About Plus500
Plus500 is a global multi-asset fintech group that operates proprietary technology-enabled trading platforms. Plus500 offers clients a range of trading products, including OTC (“Over-the-Counter” products, namely Contracts for Difference (CFDs)), stock trading, as well as futures and options on futures.
The Group is licensed and regulated in the United Kingdom, Australia, Cyprus, Israel, New Zealand, South Africa, Singapore, Seychelles, United States, Estonia, Japan, UAE and the Bahamas and through its OTC product portfolio, offering more than 2,500 different underlying global financial instruments, including stocks, indices, commodities, options, ETFs, foreign exchange and cryptocurrencies. The Group’s customers can trade their OTC products in more than 60 countries and in 30 languages.
Plus500 trading platforms can be accessed via multiple operating systems (iOS, Android and Windows) and web browsers. Customer service is and has always been an integral part of Plus500. As such, OTC customers cannot be subject to negative balances. A free demo account is available indefinitely to users of OTC trading platforms and advanced risk management tools are offered free of charge to manage leverage exposure and stop losses to help customers protect their profits while limiting capital losses.
Plus500 shares have a premium listing on the Main Market of the London Stock Exchange (symbol: PLUS) and are part of the FTSE 250 index. www.plus500.com.