Make the right choice

How could the US election 2024 affect your portfolio?

How could the US election 2024 affect your portfolio

The upcoming elections can be a source of volatility as markets are sensitive to many factors: economic, geopolitical, social. During periods of power shifts in the world's leading financial centers, investors need to pay close attention to the monetary policies of central banks. Every four years during U.S. elections, many of them have the same question: what impact will the U.S. presidential election have on the stock market?

Stock markets usually react positively to U.S. elections.

According to Bank of America, since 1944, U.S. stock markets have consistently been in the positive when an incumbent president runs for a second term - whether he or she is re-elected or not. The average annual return for U.S. stocks in this case is 16%. The 1980 election saw a skyrocketing 32.5%. The 2020 election is no exception, with a rise of 18.4%. The worst performance was the 1948 election, in which incumbent President Harry Truman faced off against Republican candidate Thomas Dewey. The U.S. stock market rose just 5.4 %.

Financial markets are sensitive to many factors

The U.S. presidential election is receiving justified attention. They have political and economic implications for the entire planet. The 2024 election could be decisive in terms of the war in Ukraine and have a negative impact on international trade if Republican candidate Donald Trump wins. But does this have any real, objectively measurable impact on stock market indices? Actually, no. The indicators mentioned above are not necessarily related to the election process. Other factors play a more important role: corporate performance, the state of the economy, the budget deficit, the external environment and, above all, monetary policy and the flow of credit into the economy. It is wrong to pay so much attention to the U.S. presidential election. The main issues for the financial markets in 2024 will be the extent to which the Federal Reserve cuts interest rates, the dynamics of household consumption, which is quite resilient, and the US inflation rate.

Investing in the green transition under a new Trump presidency

On the periphery, the presidential election may have sectoral implications. For example, it is well known that Donald Trump is more supportive of fossil fuels than renewable energy. If elected, he could make it easier to open new drilling rigs in Alaska and direct subsidies to the sector. This could temporarily boost the stock prices of companies in this segment. However, this does not mean that we should reduce the share of shares of listed companies in the renewable energy sector, which will suffer more under a Trump presidency. Let's not forget that the US state that is currently investing the most in the green transition and benefiting the most from job creation is Texas... which has been Republican since 1995 without a break and is known for its opposition to ESG. So it's much more complicated than it seems. It also underscores the fact that the role of politics in the economy and the stock market is smaller than we think. The US President can make important policy choices, such as moving semiconductor manufacturing to the US. But the federal states also have a say. Finally, there are structural trends, such as the environmental transition, that cannot be stopped no matter who is in the White House.

Our advice

As a saver, be more interested in the Fed meetings than in the polls for the Nov. 5 election. The extent of rate cuts this year will have a strong impact on the trajectory of the economy, access to credit and perhaps provide some support for commercial real estate, which is a major weakness in the U.S. economy in 2024. However, we are optimistic. We have raised our 2024 growth forecast to 1.2%. And that, of course, is just the beginning.

Comments (0)

Latest posts

Top 6 richest countries in Europe in 2024

Let's take a look at the top 6 European countries by GDP per capita: Luxembourg, Switzerland, Norway, Ireland, Denmark and Iceland. How did these countries achieve their impressive economic performance?

Read more

France's state budget deficit could exceed 5% of GDP in 2024

French state budget forecasts for 2024 are alarming: the deficit may exceed 5% of GDP instead of the expected 4.4%. There is no optimism because of weak economic growth.

Read more

Popular Tags