Trump vs. Harris: How the 2024 US Elections Could Shake Global Markets

Introduction

The 2024 US presidential election is shaping up to be a monumental event, not only for the country’s political landscape but also for traders who thrive on market volatility. A potential face-off between Donald Trump and Kamala Harris brings two vastly different economic visions, and for day traders looking to profit from short-term movements, this presents an array of opportunities.

Whether it’s Trump’s pro-business policies with a focus on tax cuts and deregulation or Harris’s progressive agenda advocating for climate change action and healthcare reform, each candidate will have significant sway over market sentiment. Traders who are quick to spot and react to these shifts could see substantial gains in sectors impacted by policy announcements, election polls, and unexpected swings.

In this article, we’ll dive into how election cycles, particularly the 2024 race, impact markets in the short term, and outline the key factors that day traders should watch to capitalize on the volatility.

Market Reactions to Election Cycles – A Trader’s Perspective

Historical Impact of US Elections on Intraday Market Movements

Presidential elections are notorious for sparking short-term volatility, a trader’s best friend. Historically, in the months leading up to Election Day, stock indices like the S&P 500, NASDAQ, and Dow Jones experience increased price fluctuations as investors adjust their positions based on the evolving political landscape. For day traders, this uncertainty presents a chance to capitalize on market swings driven by news headlines, candidate debates, and polling data.

Looking at past elections, the final weeks before voting have often been marked by sharp intraday movements as market sentiment shifts with every new development. For instance, in the 2016 election, day traders who were nimble enough to act on Trump’s unexpected win saw substantial opportunities during the initial market sell-off, followed by a rapid recovery.

Market Shocks: How Trump’s 2016 Election Win Drove Volatility in Dow Jones, EUR/USD, and Gold

Key Factors Driving Short-Term Volatility During Election Periods

Several key factors are crucial for active traders to monitor, as they can generate significant intraday price movements:

• Policy Announcements: As Trump and Harris unveil their economic policies, the market will respond in real-time. For example, if Trump reiterates plans for tax cuts or deregulation, we may see short-term rallies in industries like energy, financials, or defense. On the flip side, Harris’s proposals around climate regulation or corporate taxation could trigger intraday sell-offs in carbon-intensive sectors like oil and gas.
• Polling Data and Shifts in Momentum: As poll numbers fluctuate, so will market sentiment. Day traders can exploit these shifts, particularly when polls show one candidate gaining ground unexpectedly, which could lead to sudden market movements, especially in sectors closely tied to each candidate’s platform.
• Geopolitical and Trade Policies: Both Trump and Harris have divergent approaches to international trade. Trump’s previous trade wars, particularly with China, caused market jitters and presented short-term trading opportunities in related stocks. Harris, who is expected to take a more diplomatic stance, might ease some of these tensions, leading to momentary boosts in global trade-related sectors. Day traders should be vigilant for any shifts in rhetoric that could trigger quick market reactions.

How Traders Can Capitalize on Election-Induced Volatility

Day traders thrive in volatile markets, and the 2024 election promises plenty of short-term opportunities. Here are a few strategies to keep in mind:

Sector Rotation: As different sectors react to Trump or Harris’s policy stances, traders can exploit short-term trends in specific industries. For example, tech stocks may rally on Harris’s focus on green energy and innovation, while defense stocks could surge if Trump returns with a strong pro-military stance.

News Trading: Traders can profit from sharp price moves following breaking election-related news. This involves closely monitoring news sources and reacting quickly to updates about polling results, debate performances, or surprise policy announcements.

Event-Driven Trading: Key election events, such as candidate debates or major policy speeches, often lead to heightened volatility. Traders can anticipate larger-than-usual price swings around these events, setting up positions just before and profiting from rapid price changes as the news unfolds.

Trump’s Economic Policies and Market Impact

Donald Trump’s presidency was characterized by a series of pro-business policies aimed at deregulation, tax cuts, and a focus on “America First” trade policies. Should Trump win in 2024, his return to these economic strategies could create immediate trading opportunities, particularly in sectors that benefited from his previous administration.

Key Sectors to Watch:

• Energy and Defense: Trump’s deregulation efforts and strong focus on domestic energy production could lead to significant short-term rallies in energy stocks. Defense contractors, another sector that saw gains under his administration, may also see a surge if he emphasizes military spending.
• Financials: Trump’s preference for deregulating financial markets could again boost the financial sector, with banks and financial services firms potentially seeing a rise in stock prices. This is especially important for day traders who specialize in high-volume trading of financial stocks.

Risks Associated with Trump’s Economic Policies:

• Trade Wars and Tariffs: One of the biggest concerns surrounding another Trump presidency is the potential for renewed trade wars. In the past, tariffs on Chinese goods led to heightened volatility, particularly in tech and manufacturing. For day traders, these sudden market movements present a mix of risk and opportunity, especially if trade tensions increase unpredictability in global supply chains.
• Inflation and Fiscal Policy: Trump’s policies could lead to increased government spending in certain areas, while tax cuts could reduce government revenue. This could drive inflation fears, leading to bond market volatility and impacting currency pairs like USD/JPY, which day traders often monitor for quick price swings.

Harris’s Economic Vision and Its Market Implications

Kamala Harris represents a vastly different economic approach, one that focuses more on progressive policies aimed at addressing climate change, healthcare reform, and corporate regulation. A Harris presidency could lead to significant shifts in market sentiment, especially in industries vulnerable to increased regulation and taxation.

Key Sectors to Watch:

• Green Energy and Technology: Harris’s strong stance on climate action could bolster renewable energy stocks. For traders, solar, wind, and electric vehicle (EV) companies may see short-term price spikes as her policies favor the growth of green industries.
• Healthcare: Harris’s healthcare reform plans could have a two-fold impact. While companies focused on healthcare innovation might rally under her administration, larger pharmaceutical and insurance companies could face short-term market pressures due to fears of increased regulation. Traders should watch for sudden sell-offs or rallies in healthcare stocks tied to key policy announcements.

Concerns and Opportunities:

• Corporate Taxation: Harris is expected to push for higher corporate taxes, which may initially trigger market sell-offs in high-growth tech sectors. However, for day traders, these moments of volatility offer opportunities to exploit short-term price movements, especially in blue-chip stocks.
• Market Regulation: Increased regulation in tech and finance could lead to spikes in volatility. Harris’s proposals may prompt sharp declines in companies vulnerable to anti-monopoly actions, while smaller, innovative firms might gain traction. Day traders should be ready to capitalize on these fluctuations.

Key Market Sectors to Watch

While both candidates present distinct economic approaches, certain sectors will be particularly reactive to the election’s outcome. Day traders should keep a close eye on:

• Technology: Whether it’s Trump’s pro-business stance or Harris’s focus on regulation, tech stocks will likely experience heightened volatility throughout the election. Expect increased trading volume in large-cap stocks like Apple, Amazon, and Tesla as investors react to polling data and policy speeches.
• Healthcare: As mentioned, Harris’s platform could generate significant movement in healthcare stocks, both positively and negatively. Active traders should be prepared to enter positions quickly based on policy shifts or campaign announcements related to healthcare reform.
• Energy: Trump’s preference for fossil fuel development contrasts sharply with Harris’s green agenda. Energy stocks will likely see rapid price swings depending on which candidate gains an upper hand in the polls. Traders who are swift to follow sector-specific news will benefit from this volatility.
• Financials: Financial institutions are sensitive to regulatory changes. Trump’s win may result in a rally for financial stocks, while Harris’s regulatory focus could cause more cautious, reactionary trading. Traders can capitalize on these moves through short-term trades in financial ETFs or sector-specific indices.

Trader Strategies During Election Periods

For active day traders, navigating the volatility of election periods requires sharp, nimble strategies:

• News-Based Trading: With the 24-hour news cycle driving rapid market reactions, news-based trading is one of the most effective strategies during election cycles. Traders should focus on intraday movements triggered by breaking news, polling shifts, and key debates.
• Hedging with Options: To manage risk, traders can hedge positions using options contracts. With election uncertainty driving market sentiment, strategies like buying puts or utilizing straddles can protect portfolios from large swings while maintaining opportunities for gains.
• Trading Safe-Haven Assets: During periods of heightened uncertainty, safe-haven assets like gold, the US dollar, and bonds typically see inflows. Day traders should watch for opportunities in these markets, as well as currencies like the Swiss franc or Japanese yen, which tend to rally during times of market turmoil.
• Volatility Index Trading: As markets react to the unpredictable nature of elections, volatility tends to spike. Trading instruments like the VIX (volatility index) or volatility-based ETFs can help traders capitalize on market turbulence.

Conclusion

The 2024 US presidential election between Trump and Harris will likely generate significant short-term market volatility, providing a wealth of opportunities for active day traders. By closely monitoring policy announcements, sector movements, and global trade developments, traders can position themselves to take advantage of price swings across various markets.

As with any period of uncertainty, the key to success lies in preparation and the ability to act quickly. Traders should remain flexible, diversify their strategies, and stay tuned to market-moving news as the election unfolds.

Ian G. | Published on 22/10/2024