How the 2024 U.S. Presidential Election Could Impact Global Financial Markets
The results of the 2024 U.S. presidential election will have a profound effect on global financial markets. With only weeks to go, the race between candidates Kamala Harris and Donald Trump remains incredibly tight. Recent polls show Harris leading in key swing states like Arizona, Michigan, Wisconsin, and Georgia, while Trump holds a slight edge in Nevada, North Carolina, and Pennsylvania. But for investors, the real concern lies not in who wins, but in how the policies of either administration will shape financial markets worldwide.
In this article, we'll explore the potential impact of each candidate's victory on various markets, including currencies, stocks, and emerging markets.
Currency Markets: Trade Wars or Stability?
Trade tariffs are at the forefront of any discussion on global currency markets, especially given the potential protectionist policies of both candidates. Harris is expected to pursue more targeted tariffs, while Trump has signaled a return to the aggressive, disruptive trade measures of his previous term.
- If Trump wins: The U.S. dollar could strengthen as tariffs rise across the board, placing major global currencies like the euro at a disadvantage. Analysts at BlueBay Asset Management suggest that a Trump victory could push the euro down to $1.05, as global trade tensions increase. Additionally, currencies tied to economies that rely on exports—such as the Australian and New Zealand dollars—may also take a hit, while geopolitical risks, especially in the Middle East, could drive oil prices higher and make the euro more vulnerable.
- If Harris wins: We could see a more moderate approach to tariffs, which might give the euro a boost. BlueBay predicts that a Harris victory could push the euro above $1.15. Moreover, Harris's stance on reducing geopolitical tensions could help maintain stability in global currency markets, benefitting currencies like the Canadian dollar and the Norwegian krone.
U.S. and European Stock Markets: Trade Tensions vs. Tax Policies
The U.S. and European stock markets will respond differently depending on the winner of the election. Trump's policies favoring U.S. manufacturing and protectionism may weigh on export-heavy sectors, especially in Europe.
- If Trump wins: Export-dependent industries, particularly in Europe, could face trouble. Companies like BMW and luxury brands like LVMH might suffer if Trump reignites trade tensions. Barclays has warned that European corporate profits could drop by “high single digits” if Trump imposes a 10-20% tariff on imports. Additionally, Trump's plans to lower corporate taxes for U.S. manufacturers and cut taxes on American citizens living abroad may offer some relief to U.S. industries, but the global trade friction would outweigh these benefits for Europe.
- If Harris wins: European stocks tied to renewable energy, like Orsted and Iberdrola, could see a lift from Harris's continuation of pro-climate policies. However, her proposal to raise corporate taxes from 21% to 28% could weigh on U.S. companies, potentially curbing profit margins both at home and in Europe.
Emerging Markets: Uncertainty Ahead
Emerging markets have been underperforming developed markets for much of the past decade, but recent signs suggest a turnaround. Falling fuel prices, a weakening U.S. dollar, and interest rate cuts from the Federal Reserve have helped emerging economies, which are highly dependent on imports.
- If Trump wins: His protectionist stance and global tariffs could threaten this optimism. Mexico, with its strong trade ties to the U.S., is likely to be hit the hardest. Investors are also wary that Trump's tariffs could lead to a significant decline in emerging market stocks, with UBS predicting a potential 11% drop in value if his policies are enacted.
- If Harris wins: Emerging markets could benefit from a continuation of current policies, especially if global trade relations remain stable. Harris's approach may provide emerging economies with the breathing room they need to grow, particularly if fuel and food prices continue to drop.
Conclusion: The High Stakes for Investors
The 2024 U.S. presidential election is shaping up to be a pivotal moment for global financial markets. Both candidates have vastly different approaches to trade, taxation, and regulation, and the implications of their policies will ripple across currencies, stocks, and emerging markets.
Investors would do well to adopt a cautious approach until the election outcome is clear. While Trump's protectionist policies may boost U.S. manufacturing and deregulation efforts, they could cause global market turbulence. Conversely, Harris's more measured approach may offer stability in global trade relations but could lead to higher corporate taxes that may weigh on market performance.
Stay tuned for our next article, where we'll dive into the industry-specific impacts of the election. From the future of electric vehicles and tech regulations to how the financial sector and healthcare industries could be reshaped, we'll analyze how each candidate's policies might affect key sectors in the economy. Don't miss it!
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