US Election 2024 - Part One: Scenarios and Recap
1. The impact of the election on markets
US presidential elections tend to stir markets and bring higher volatility, especially when the candidates are markedly different in their approaches to the economy and politics. At such times, investors watch the candidates' every move, analyse their agendas and predict the impact on key sectors. When lower taxes and deregulation are on the table, a positive effect on corporate profits is expected. Conversely, a focus on sustainability or increased regulation presents opportunities for green companies and industries focused on energy innovation.
In the current situation, on the one hand, we can see Trump's agenda focused on promoting domestic business, deregulation and tax cuts. On the other, Harris emphasises the green economy and social responsibility. Each of these approaches promises different effects for the financial markets and key sectors, while history shows us that investor nervousness is greater during election periods. An analysis of 24 presidential elections since 1928 shows that when the results are uncertain, markets tend to fluctuate and often remain tense until the very end of the campaign. In addition, the Research Affiliates study found that the S&P 500 Index typically declines in the run-up to close elections and can experience a sharp rise in the final week of the campaign, followed by increased volatility after the election.
2. Donald Trump - direction and implications
Should Donald Trump win the election, it can be expected that his policies would follow the same pattern as during his previous time in office. His key directions would include several key points:
- Tax cuts and deregulation: Trump's support for tax cuts and looser regulations is focused on corporations, which could boost corporate profitability, particularly in the energy and financial sectors. Such an approach would boost domestic business, while lower taxes and a looser regulatory environment would have a positive impact on US corporations and markets.
- Support for fossil fuels and traditional energy: Trump remains a supporter of traditional energy sources such as oil, gas and coal, and opposes strict environmental regulations that would restrict the extraction of these resources. This approach could boost the oil and mining industries in particular and benefit companies such as ExxonMobil and Chevron.
- America First - promoting domestic manufacturing: With an emphasis on reducing dependence on foreign supply chains and promoting domestic manufacturing, Trump's policy could strengthen US industry while reducing dependence on international markets.
- Protectionism and trade wars: Trump's trade wars and tariffs could negatively affect companies focused on global trade, while U.S. firms focused on the domestic market could benefit from less foreign competition. These measures could widen economic disparities between the U.S. and its trading partners, and the broader impact could be felt in global markets.
- Traditional infrastructure: Trump's infrastructure support is focused on traditional projects such as roads, bridges and airports, which could boost heavy industry and construction firms such as Caterpillar, which specializes in supplying traditional infrastructure projects.
3. Kamala Harris - direction and impact
Should Kamala Harris prevail, her administration would likely bring progressive changes focused on sustainability, ESG and social justice. Her top priorities could include:
- Promoting green energy and sustainability: Harris is likely to increase investment in renewable energy and green projects to reduce the US carbon footprint. This approach would bring opportunities to companies in the solar, wind and hydrogen energy sectors, such as NextEra Energy and First Solar. At the same time, hydrogen energy companies like Plug Power could grow.
- Increase taxes and regulations on large corporations: Democrats are leaning toward higher taxes and tighter regulations, especially in the technology and financial sectors. This approach could create an advantage for smaller businesses that are not as taxed as large corporations, thereby boosting entrepreneurship.
- Social justice and ESG policies: Harris emphasizes diversity and inclusion and supports companies that invest in responsible business practices, which could support the growth of companies like Salesforce and Microsoft that focus on ESG and social responsibility.
- Support for public health care: Democrats, including Harris, are pushing for greater access to health care, which could support the growth of companies like UnitedHealth Group and CVS Health that focus on providing health care services and insurance.
4. Impacts on the world
The U.S. presidential election has far-reaching global implications, and each candidate brings a different strategy for international policy, which could significantly affect global trade and relations between the U.S. and the rest of the world.
- Trump's policies - Protectionism and trade wars: Trump would likely continue his protectionist policies, including tariffs and other restrictions on trade with key partners such as China, the European Union and others. This approach could destabilise global markets and increase costs for companies dependent on international supply chains, which could also have implications for global GDP. Imposing tariffs would likely trigger retaliatory measures and increase tensions in international trade.
- Harris and environmental diplomacy: In contrast, Harris would focus on strengthening cooperation with international partners on environmental initiatives and global sustainability. This approach could provide support for international green economy projects and create opportunities for companies in the European Union and Asia with a focus on ESG (Environmental, Social, and Governance). Common environmental goals could strengthen relations between the US and its partners, but at the same time this approach could create challenges for industries that would have to adapt to stricter environmental standards.
5. Impacts on the Czech Republic
The results of the US presidential election may also have implications for the Czech Republic, especially given the different positions of the two candidates on international trade and environmental regulation.
- Trump's policies - Protectionism and tariffs: If Donald Trump imposes tariffs on European products, this could indirectly affect Czech exports, especially in the automotive sector. Although the Czech Republic does not directly export cars to the US, it is an integral part of the supply chains of the European automotive industry, which could be affected by a drop in demand due to tariffs. This could lead to a slowdown in Czech GDP growth and increase uncertainty in Czech markets.
- Harris and green politics: On the other hand, a victory for Kamala Harris could bring opportunities for Czech companies focused on green technologies and renewable energy. Her emphasis on the green economy and sustainability could foster cooperation between the US and the EU on green projects, creating new markets for Czech companies specialising in innovative technologies and sustainable products. However, stricter environmental regulations could also pose a challenge to traditional Czech industry, which would have to invest in greener production processes to meet the new standards.
Disclaimer:
This article is provided for informational purposes only and should not be considered investment advice, a recommendation to buy or sell securities or any other financial products. The authors make no representations as to the accuracy, completeness or timeliness of the information contained in this article. Readers should consult a financial advisor or other professional if they need specific investment advice or if they have questions about their financial decisions. The authors of this article are not responsible for any loss or damage caused by the use of the information in this article. Past years' profits are no guarantee of future profits.
