US Election 2024: Analysing Market Impact – Insights from Saxo Bank

As the 2024 US election approaches, investors are keenly assessing the potential market impacts of a Democratic versus Republican victory. Althea Spinozzi, Head of Fixed Income Strategy at Saxo Bank, provides an overview of how different asset classes might react depending on the election outcome.

Stock Market Reactions

Historically, stock markets tend to perform well during the first year of a Democratic presidency, with indices like the Russell 2000 and NASDAQ showing stronger gains. Sectors such as healthcare, technology, and renewable energy are likely to benefit from Democratic policies.

Conversely, a Republican president may favor banking, industrial, and energy sectors through deregulation and tax cuts, which have previously driven stock market gains.

Bond Market Dynamics

Althea Spinozzi notes that regardless of which party wins, significant fiscal spending is expected, putting pressure on bond yields. Under a Republican president, policies may push bond yields higher, making fixed-income investments less attractive.

A Democratic victory could also maintain high spending levels, but with different fiscal priorities, still resulting in upward pressure on yields. Investors should be cautious of potential losses on existing bonds as new bonds may offer better returns.

Gold and Crude Oil Prices

Gold typically performs well during Republican presidencies due to economic uncertainty and geopolitical tensions. A Democratic win might see more stable or declining gold prices as economic stability improves.

For crude oil, Republican policies favoring fossil fuels could drive significant gains, whereas Democratic policies might focus more on renewable energy, leading to stable to moderate increases in oil prices.

Historical Market Trends

• Democratic Presidents: Bill Clinton saw robust economic growth, technological advancements, and a strong stock market. Barack Obama’s terms were marked by recovery from the Great Financial Crisis, with substantial gains in stock markets, especially in 2013.
• Republican Presidents: George W. Bush faced economic challenges following the dot-com bubble burst and 9/11 attacks, leading to mixed market performance. Donald Trump’s presidency saw stock market optimism from tax cuts but increased volatility from trade tensions.

Market Expectations for 2025

According to Althea, here’s what we can expect in 2025 after the US election:

• If a Democratic President Wins: Expect positive stock market performance, stable or declining gold prices, moderate crude oil gains, and stable bond yields due to policies maintaining economic stability.
• If a Republican President Wins: Mixed stock market performance with potential gains in energy and industrial sectors, higher gold prices in times of uncertainty, stronger crude oil gains, and varied bond market performance influenced by growth-boosting policies.

As we move closer to US Election Day, market volatility is expected. Investors should stay focused on economic indicators and adjust their strategies accordingly to navigate this period of uncertainty.