2024 election: What a Harris or Trump win means for markets

Summary

As the presidential election approaches, the stock market is adjusting to potential disruptions. Long-term investors should remain cautious, as historical trends show elections rarely affect stock trajectories. Utilities and financials have performed strongly, benefiting from current economic conditions. While stocks have outpaced bonds, inflation remains a concern, especially if Trump is elected. Gold has surged amid uncertainties, reflecting its status as a safe haven. Ultimately, despite short-term volatility, the S&P 500 has shown resilience, achieving over 200% growth in the last decade, highlighting the importance of a long-term investment strategy.

Takeaways

• 📈 The stock market is preparing for potential disruption due to the upcoming presidential election in two weeks.
• 💡 Long-term investors should avoid making drastic moves, as historical trends show elections rarely impact stock trajectories.
• 🔌 Utilities and financial sectors have seen significant gains, with utilities up nearly 30% in 2024, driven by energy demand and AI advancements.
• 🏦 Financials are also performing well, up 25% this year, benefiting from strong earnings under the current administration.
• ⚖️ A Harris administration might maintain the positive status quo for financials, while a Trump administration could lead to deregulatory measures.
• 📊 Stocks have outperformed bonds recently, with the 10-year treasury yield around 4.2%, reflecting a 'higher for longer' policy from the Federal Reserve.
• 📈 Inflation risks remain under both potential administrations, with economists suggesting a Trump presidency could lead to increased inflation due to proposed tax cuts.
• 🪙 Gold has surged amid market uncertainties, becoming a favored safe-haven asset, often keeping pace with the S&P 500.
• 📉 Despite short-term fluctuations, the S&P 500 has risen over 200% in the last decade, demonstrating resilience through various political changes.
• 🔍 As uncertainty increases, it's crucial for investors to remember that enduring market volatility can yield long-term gains.

Q & A

What is the main focus of the wealth tip discussed?

The main focus is on hedging against short-term volatility in the stock market, especially in light of the upcoming presidential election.

How have utilities and financials performed recently?

Utilities have risen nearly 30% and financials about 25% since the start of 2024, largely due to strong earnings and defensive strategies.

What role does the presidential election play in stock market performance?

Historically, elections do not significantly alter the long-term trajectory of stocks, although there may be short-term changes based on election outcomes.

Why are utilities considered a defensive play?

Utilities are typically less sensitive to political changes and tend to perform well regardless of which party is in power.

What is the significance of the 10-year treasury yield mentioned?

The 10-year treasury yield at around 4.2% indicates traders' expectations of a 'higher for longer' interest rate policy from the Federal Reserve, impacting stocks and bonds.

How could a Trump presidency impact inflation?

A Trump presidency might lead to higher inflation due to proposed tax cuts and tariffs, potentially influencing the Federal Reserve's interest rate policies.

What has been the recent trend in gold prices?

Gold prices have surged to multi-year record highs, serving as a safe haven amid uncertainties, including the presidential election and global conflicts.

What long-term trend is observed in the S&P 500 over the past decade?

The S&P 500 has increased more than 200% over the past 10 years, despite various political changes and short-term market fluctuations.

What is the overall message for long-term investors regarding current market volatility?

Long-term investors should remain focused on the market's resilience and not make hasty decisions based on short-term volatility.

What are the key factors influencing stock versus bond performance currently?

Strong economic growth, employment rates, and the Federal Reserve's policy outlook are currently favoring stocks over bonds.