TV Debate: Harris vs. Trump – What Will Be the Markets’ Reaction?

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The Anticipated Showdown: Harris vs.
Trump

The night of Harris and Trump is upon us, as the first televised debate between the two presidential candidates will air at 9 PM ET (3 AM in Italy).
This historic event marks an unprecedented face-off between the sitting Democratic Vice President Kamala Harris and the Republican tycoon Donald Trump.

This encounter is expected to reverberate through Wall Street, potentially increasing market volatility.
Current uncertainties related to the job market, interest rates, and geopolitical issues are already making investors anxious, making this debate even more significant.

Recently, the S&P 500 index faced its worst week since March 2023 after a disappointing employment report reignited recession fears.
Analysts note that the declining prospects for U.S.
stocks are heightened by a surge in demand for portfolio protection, as indicated by activity in the options markets, driven by economic uncertainties and the changing policies of the Federal Reserve.

The Financial Context

The televised debate is viewed as a pivotal moment for global markets, not just Wall Street.
Currently, the Cboe Volatility Index hovers around the 20 mark, compared to a 2024 average of 14.8, reflecting traders’ demand for protection against stock fluctuations.

Data from Bank of America reveals that the VIX typically spikes by about 25% between July and November in election years, as investors focus on the market implications of the candidates’ political proposals.
This year, heightened political concerns are compounded by stronger volatility triggers like worries over a potential economic downturn.

Economic Proposals and Market Impacts

The outcomes of the Harris-Trump debate are highly anticipated on Wall Street, particularly concerning economic issues that could significantly influence stock performances and overall financial sentiment.

Trump’s agenda suggests lower taxes and the extension of tax cuts from 2017, alongside increasing fossil fuel production and slashing public spending supported by aggressive deregulation.
His “America First” principle includes extensive tariffs on imports.

Conversely, Harris proposes higher taxes on wealthy individuals and corporations to fund social safety plans, offering tax credits for childcare and incentives for small businesses while pledging to combat price speculation vigorously.

These economic plans, highlighted during the debate, have the potential to affect publicly traded companies.
For instance, traditional oil, gas, and energy companies might stand to benefit under a Trump victory, while defense stocks are expected to perform better, given anticipated increases in defense spending.

Interestingly, crypto-related stocks have been regarded as a “Trump trade,” as he aims to position the U.S.
as the global “cryptocurrency capital.” On the other hand, a Harris triumph could favor sectors like renewable energy firms, electric vehicle manufacturers, and even housing developers due to her supportive housing policies.

Political Climate and Investor Sentiment

Investors are not only honing in on the issues but also on the candidates’ rhetorical tones and the intensity of their confrontation, harboring fears of an inconclusive election outcome.
The upcoming debate will serve as a barometer for the electoral climate.

Despite Harris’s upward trend in recent polls, market experts caution that election results may remain uncertain longer than anticipated.
Historical precedent during the 2000 Florida recount saw the S&P 500 drop over 4%, while Treasury yields fell sharply, and gold prices soared as investors flocked to safe havens.

Moreover, the potential for the 2024 U.S.
presidential election to culminate in prolonged disputes or even political violence is a scenario investors are also preparing for, which could lead to significant market disruptions.

In summary, the Harris-Trump debate not only promises to be an intriguing political event but also a pivotal moment for understanding possible market reactions depending on the election’s outcomes.

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