CONTENTS :
The US presidential election is always a landmark event for financial markets. As the 2024 election between Donald Trump and Kamala Harris approaches, traders should be prepared to navigate a period of uncertainty and increased volatility. This article explores trading strategies and financial assets to watch out for to maximise your opportunities while minimising risk.
1. Understanding Political Impact on Markets
The US election could have a major impact on a number of sectors, depending on the candidates' perspectives. For example:
- Donald Trump : His economic policy is generally pro-business, with tax cuts and deregulation. Sectors such as traditional energy, finance and defence could benefit from a possible victory.
- Kamala Harris : She could focus on policies favourable to renewable energy, public health and the regulation of large technology companies. Markets could react positively in the green energy, biotechnology and tech sectors.
2. Financial assets to watch
A. Equities
Certain equities will be particularly sensitive to the election outcome :
- Energy: Companies in the oil sector could see their value rise if Trump takes the lead, while renewable energy companies such as Tesla and NextEra Energy could benefit from a Harris victory. When it comes to electric cars, Donald Trump is tending to tone down his rhetoric with Elon Musk's open support.
- Technology: This sector will be under intense scrutiny, particularly for large companies such as Apple, Google and Amazon. Under a Harris administration, these companies could face increased regulation.
- Defence sector: The shares of companies such as Lockheed Martin and Northrop Grumman could be influenced by a Trump presidency, given his military build-up policies.
B. Currencies (Forex)
The US dollar (USD) will take centre stage.
Political uncertainty can lead to significant volatility in the USD, especially against safe-haven currencies such as the Swiss franc (CHF) or Japanese yen (JPY). A popular strategy is to look to pairs such as USD/JPY or EUR/USD to capture sharp movements.
C. Cryptocurrencies
When it comes to cryptocurrencies, the issue is less clear-cut.
Donald Trump has openly presented himself as THE defender of cryptocurrencies, promising to put an end to what he describes as an ‘illegal and un-American crackdown’ on the industry. This choice worked well for him at the start of the election campaign, with the presidential candidate receiving several million dollars in crypto donations.
Kamala Harris is not to be outdone on the topic, however, and could chart a new course, breaking with that of Joe Biden. She could approach cryptography issues with an open mind, without prejudice, and more in tune with public opinion...
D. Commodities
Commodities may also be affected by the election outcome :
- Gold : Considered a safe haven, gold is a key asset to watch in times of uncertainty. High volatility or unexpected results can increase demand for gold.
- Oil : The candidates' energy policies will have a direct impact on oil prices. Support for fossil fuels under Trump could drive up prices, while a transition to renewable energies under Harris could have the opposite effect.
E. Treasuries
US Treasuries are another asset to watch :
In the event of a Harris victory, investors could anticipate an increase in public spending, which could put pressure on interest rates and affect bonds. Conversely, a Trump victory could be perceived as favourable to markets, thereby stabilising bond yields.
3. Trading strategies to consider
A. Hedging
Given the uncertainty, a hedging strategy may make sense. For example, if you hold election-sensitive equities, you can use options or futures contracts to protect yourself against price fluctuations.
B. Short Term Trading
Day trading or swing trading may be better suited to this period, given the expected volatility. Poll announcements or debates can create fast trading opportunities.
C. Attentistic approach
Some traders prefer to wait until the election outcome is clear before taking significant positions, in order to reduce their exposure to risk.
Conclusion
The 2024 US presidential election between Donald Trump and Kamala Harris promises to be a major event for financial markets. As a trader, it is essential to monitor the campaign closely and understand the potential implications of each candidate on different financial assets. A well-informed and strategic approach can help you navigate this volatile period successfully.
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