Likes ReceivedThe impact of the presidential election trade on assets?
Introduction: ①US Q3 earnings, ②presidential election, ③Q4 rate cut expectations, these three main themes intertwine in the capital markets. We focus solely on the presidential election thread, quantitatively analyzing four scenario models under US election trading.
1. What assets are being traded in the "Trump Trade"?
Recently, the rise of Trump concept stocks (DJT) reflects the probability of Trump's election victory. As of last weekend, Trump's win probability rebounded sharply to 61%, marking the return of "Trump Trade." Bitcoin BTC and the US Dollar Index both strengthened, while US Treasury yields rose, reflecting market expectations that Trump 2.0 will reignite inflation, leading to a repricing of financial markets for a Trump presidency.
2. What are the possible outcomes of the presidential election? How will major asset classes perform?
For the presidential election, based on betting odds (which are more sensitive and indicative), there are four possible scenarios by party:
Scenario 1: Republican sweep (43%), US stocks > USD > gold > US Treasuries. On one hand, Trump could smoothly implement policies like corporate tax cuts and deregulation, benefiting US stocks with more "America First" policies. On the other hand, policy resonance (tariffs + immigration tightening) could increase US reflation pressure, potentially boosting the USD while pressuring long-end Treasuries.
Scenario 2: Trump + Republican Senate, Democratic House (15%), US stocks > USD = gold > US Treasuries. A split with the House (holding fiscal power) would hinder Trump’s agenda, making tariffs and tax cuts harder to pass. Thus, US stocks might see only modest gains.
Scenario 3: Democratic sweep (14%), USD and US stocks weaken. Corporate tax hikes could drag on earnings, while wealth taxes dampen risk appetite, pressuring US stocks. A recession could weaken the USD. However, Harris’s fiscal policy is less aggressive, limiting Treasury yield rises vs. a Trump win.
Scenario 4: Harris + Republican Senate, Democratic House (24%), US stocks may underperform. The House’s control over spending could help pass Harris’s tax policies (e.g., corporate tax hikes), pressuring stocks short-term but creating structural opportunities. Other assets neutral.
3. Which stocks are most affected by the four election scenarios?
The US election outcome impacts sectors differently, especially tech giants and gig economy firms.
① If Harris wins with a split Congress, social media firms like Meta and Snap may benefit from a potential TikTok ban, while antitrust pressure on big tech persists but won’t drastically alter operations due to gridlock.
② If Democrats control the White House and Congress, big tech could face tougher antitrust rules (e.g., a US version of the EU’s Digital Markets Act). Meta and Snap might gain short-term from a TikTok ban, but gig firms like Uber and Lyft could face cost pressures from new laws. Corporate taxes may rise.
③ If Trump wins with a split Congress, tariff shifts could favor domestic e-commerce. Big tech’s antitrust risks may ease, but Googl could face scrutiny over search results. Gig economy growth may continue without worker reclassification laws.
④ If Republicans control the White House and Congress, tax cuts and high tariffs could boost tech and domestic e-commerce. Chinese firms like Temu and Shein may face challenges, indirectly affecting Googl and Meta.
Overall, Meta and Googl are highly sensitive to election results, as are gig firms like Uber and Lyft. Other sectors (e.g., dining/retail) should watch immigration and China tariffs. Historically, consumer stocks outperform under Republicans, while energy and tech fare better under Democrats—though this diverges from BofA’s analysis. Long-term election impacts are limited, but short-term market moves hinge on tariffs and tax cuts.
But don’t lose sight of the logic: stocks’ primary driver now is Q3 earnings, while the election is a secondary factor.
4. What policy trends might emerge under Trump or Harris? (Chart)
The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.
