Global Markets Overview is published and updated every month. This includes what has happened in markets, our macroeconomic outlook and price updates on assets such as government bonds, credit and equities.
In this Global Markets Overview
In this issue, we're taking a closer look at the U.S. election.
Who is in the lead?
- Based on averages of national polls, Harris is ahead by 1-3%pts, and polling has improved significantly in several key battleground states since Harris entered the race.
- However, this lead is fickle and is only just enough to overcome the Democratic Party’s slight disadvantage in the electoral college. Therefore, the Presidential Election remains too close to call.
Why does it matter?
- The elections impact Federal policy and therefore the economy, and so have the potential to be a driver of market volatility (particularly if election outcomes amplify markets’ existing fears/hopes).
- Arguably the outcomes in Congress are as important as who wins the White House, certainly for economically important national tax & spend policies.
Contrasting Trump's and Harris' policies, these are a few of the implications that we predict for investors:
Trade:
- Trump biased policy: Potential tariffs against all trade partners, including allies, but initially focused on China.
- Harris biased policy: China policy in line with current administration but still hawkish. Prefers more stable trade relationships.
- How we believe investors will be impacted: Multiple impacts, the detail of how trade tensions manifest really matter for winners/losers and market impact. However, more likely than not tarrifs result in a stronger USD and, at least for a time, somewhat higher U.S. inflation.
Fiscal policy:
- Trump biased policy: Extension of personal and corporate tax cuts. Amendments to the Inflation Reduction Act.
- Harris biased policy: Tax rises on corporations and the wealthy. Spending on housing, healthcare, childcare etc.
- How we believe investors will be impacted: Proposed fiscal policy is loose under both candidates. This may put upwards pressure on both inflation and Treasury yields. A split congress may be less inflationary as legislation is more difficult to pass.
Immigration:
- Trump biased policy: Stringent border controls. Trump has discussed mass deportation of undocumented migrants.
- Harris biased policy: More lenient on immigration. Supports legal pathways and family reunification.
- How we believe investors will be impacted: Labour markets may tighten under the proposed policies put forward by Trump. This could place upwards pressure on wages and inflation, and that may be enough to offset other cyclical disinflationary forces.
To see all our predicted policy implications for investors, download the September issue of our Global Markets Overview.
