The upcoming U.S. presidential election on November 5, 2024, is anticipated to introduce significant volatility across financial markets. Historically, elections have influenced market dynamics, and the current race between Vice President Kamala Harris and former President Donald Trump is no exception.
Recent analyses suggest that a Trump victory could benefit equity markets in the short term, particularly sectors like banking, cryptocurrency, energy, and health insurance, due to his pro-business policies. Conversely, Harris's policies might favor sectors such as homebuilding, healthcare, and renewable energy, focusing on tax incentives, healthcare cost reductions, and environmental commitments.
Investors are preparing for potential market fluctuations, with volatility indices reflecting heightened uncertainty. The Ice BofA Move index, indicating future Treasury market movements, surged nearly 40% in October, reaching its highest in over a year. Similarly, the VIX index, which measures stock market volatility, has shown unusual highs relative to actual volatility.
Given these conditions, it's recommended for investors to monitor their portfolios closely and consider strategies to mitigate potential risks. Maintaining adequate liquidity and staying informed about market developments can help navigate the anticipated volatility during this election period.
Easing oil prices and retreating Treasury yields (around 5.23% ) provided some relief to financial markets as improving US-Iran diplomatic prospects reduced immediate inflation concerns.
Hawkish Federal Reserve meeting minutes reinforced expectations for another rate hike this year, pushing Treasury yields higher and supporting the US dollar.
Oil inventories are nearing depletion, increasing supply risks and supporting prices. Aramco estimates less than 6 billion barrels remain after over 1 billion barrels were drawn this year, while the IEA is preparing a 100-million-barrel release. The US 10-year Treasury yield stabilized near 5.31% on Wednesday, close to 24-year peaks, as markets awaited the Fed's minutes.
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