Amid the U.S. Election, many are uncertain about who will win… What does a Trump or Kamala victory mean for the markets? Read to find out.
This combination of photos shows Republican presidential nominee former President Donald Trump, left, speaking at a campaign event Sept. 25, 2024, in Mint Hill, N.C., and Democratic presidential nominee Vice President Kamala Harris, right, speaking a campaign event Oct. 19, 2024, in Atlanta. (AP Photo) (Associated Press)
During the 2024 U.S. election period, the stock and crypto markets have demonstrated increased volatility, largely driven by uncertainties around potential economic policies and market expectations under different political leadership. Here’s a technical analysis based on key indices, cryptocurrencies, economic indicators, and potential outcomes under each candidate’s victory.
Market Behavior During Election Period
DXY (U.S. Dollar Index):DXY on daily time frame with MACD indicator. Retrieved from TradingView on 5/11/24.
DXY has shown significant fluctuations as markets price in the implications of possible fiscal policies. A strong dollar is generally anticipated under a more conservative fiscal approach due to reduced spending, while the opposite might hold with more expansionary policies.
DXY tends to strengthen during periods of market uncertainty and volatility. As the election approaches, heightened market sensitivity to polling data has contributed to this volatility. However, DXY shows signs of weakness, indicating a potential downtrend of the US dollar.
2. VIX (Volatility Index):
VIX daily range. Retrieved from TradingView on 5/11/24.
Historically, the VIX spikes during election cycles as uncertainty causes investors to hedge against volatility. The 2024 election has shown a similar trend, with VIX remaining elevated as markets navigate potential shifts in monetary and fiscal policies.
VIX is expected to remain elevated through the election outcome, with a potential decline post-election once a clearer policy direction is confirmed.
3. BTC (Bitcoin):
BTC on daily time frame & MACD indicator. Retrieved from TradingView on 05/11/24.
BTC tends to act as a hedge against fiat instability, and during election periods, its volatility increases, often influenced by expectations around regulation and economic stability.
BTC has experienced spikes correlating with key election announcements and debates. As a potential hedge against inflation and economic uncertainty, BTC could rally if post-election policies indicate economic instability. BTC does not display any signs of weakness, no bearish divergence on a daily time frame and volumes are positive.
4. S&P 500, Dow Jones, Nasdaq:
S&P 500, Nasdaq & Dow Jones Indices.
Major U.S. indices typically see increased volatility during election cycles, driven by sector-specific concerns. For example, technology-heavy Nasdaq tends to be sensitive to regulatory policy, while the Dow Jones may respond more directly to industrial and fiscal policies.
The S&P 500 and Nasdaq have shown mixed performance with upward momentum on strong earnings and downward pressure from rate hike concerns. The Dow Jones has displayed less volatility due to its industrial weighting, which is typically less influenced by election rhetoric.
6. U.S. PMIs (Purchasing Managers’ Index):
Manufacturing PMI. Retrieved from Investing.com on 05/11/24.
PMIs serve as a barometer of economic health and tend to reflect shifts in business confidence, especially around elections. Lower PMIs could reflect business concerns over uncertain policy directions.
Recent PMIs have been steady, Manufacturing PMI around 47 and 48 for the past months and Services PMI at 56. A reading above 50 indicates an expansion in the economy, while below 50 indicates a contraction. Some sectors show signs of slowing due to persistent inflation and elevated interest rates, which could further weaken if the election exacerbates uncertainty.
7. FOMC Meetings and Interest Rates:
FOMC Calendar Nov 2024. Retrived from Trading Economics on 05/11/24.
The FOMC’s monetary policy decisions heavily influence market sentiment, particularly around the election period. Rate decisions or indications of future policy paths will likely be interpreted in light of each candidate’s stance on the economy.
The FOMC has signaled a holding pattern with rates, leading to speculation about future cuts or hikes depending on economic indicators post-election. The Fed’s posture will weigh heavily on equity and bond markets following the election outcome.
Scenario Analysis: Kamala Harris vs. Donald Trump Win
Kamala Harris Win:DXY: Likely to weaken slightly as expansionary policies could lead to higher government spending, which might pressure the dollar if markets perceive a risk of inflation.VIX: Expected to decline post-election as clarity returns, but certain sectors may experience heightened volatility, particularly healthcare and clean energy.BTC: Could see an initial rally if regulatory concerns are minimal; markets may view it as a hedge against inflationary pressures if government spending increases.S&P 500 and Nasdaq: Likely mixed, with technology and clean energy sectors potentially benefiting. Healthcare could be volatile due to possible policy changes.Interest Rates and FOMC: The Fed may adopt a dovish stance if government spending is high, potentially lowering rates to stimulate the economy. However, inflation concerns could counteract this. Dovish policy prioritizes low unemployment and may involve lowering rates.
2. Donald Trump Win:
DXY: Likely to strengthen if market anticipates tighter fiscal policies and less government spending, which could support a stronger dollar.VIX: A post-election decline in VIX is likely, but with a notable focus on sectors tied to trade, defense, and industrial production.BTC: Likely to show resilience if deregulation signals stability; however, any uncertainty regarding broader economic stability may still support BTC as a safe-haven asset.S&P 500, Dow Jones, and Nasdaq: The Dow may outperform due to anticipated support for industrials and energy. Technology could face mixed reactions based on regulatory expectations, while financials may benefit from deregulation.Interest Rates and FOMC: The Fed may maintain a cautious stance on rates, with potentially hawkish tones if inflation is managed and spending remains controlled. Hawkish monetary policy focuses on low inflation and may involve raising interest rates.
Summary
The U.S. election period of 2024 is a critical moment for financial markets, with implications on everything from equities to cryptocurrency. A Kamala Harris win could signal support for clean energy and healthcare, potentially weakening the dollar slightly but supporting innovation sectors. In contrast, a Donald Trump win may strengthen the dollar and boost industrial sectors, with anticipated regulatory leniency benefiting traditional industries.
Both outcomes will affect the broader economic and investment landscape, shaping FOMC rate decisions and impacting both DXY and VIX behavior, as well as the performance of major indices and alternative assets like BTC.
U.S. Election 2024: Trump vs Kamala was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.