US Election 2024: Paths to Victory for Kamala Harris and Donald Trump

Political

Economic

Summary:

What to watch for the US dollar and the Nasdaq 100?

Overview

The US 2024 presidential election is shaping up to be a closely contested race, with Kamala Harris and Donald Trump vying for the lead in national and state polls. National polling average shows that it is almost neck and neck between the two candidates, while the electoral college dynamics are likely to inject further uncertainties into the presidential outcome.

Despite some slight unwinding of the ‘Trump trade’ into the new week, the US dollar managed to regain some footing overnight, largely as a result of traders managing their positioning for the risks of a potential surprise. We may likely expect more consolidation ahead in the lead-up to the US election before a surge in volatility once election uncertainties clear.

For now, it can be hard to pinpoint an immediate direction for the equities market in the near term, with either scenario bringing both a bull and bear case. But any weakness may offer opportunities for dip-buying, as economic fundamentals may eventually take over while policy uncertainty clears, alongside the general positive seasonality into year-end and post-elections.

Paths to victory for Kamala Harris

Most US states are traditionally Democratic or Republican states, and assuming no surprises on those fronts, it will once again boil down to the key battleground states to determine who sits on the US president seat. With traditionally Democratic states accounting for 226 votes, Kamala Harris will need to secure another 44 votes to achieve the 270 votes required to win.

Her path to victory may be:

The most clear-cut path for Harris may be to reclaim all traditional Midwest battlegrounds (Michigan +15, Wisconsin +10, Pennsylvania +19), which will offer her the exact amount of votes to secure her victory. Current polling shows that Harris has a slight lead over Trump in Wisconsin and Michigan, but Pennsylvania remains tight at a 0.3% margin. Claiming Pennsylvania will be a big boost to either side, given that it accounts for the most electoral votes (+19) among the battleground states.

Another path for Harris may be to secure its 2020 Sun Belt states (Arizona, Nevada and Georgia), where demographic changes in terms of younger/Hispanic voters are favouring Democrats. These states were narrowly won by Democrats in 2020, so retaining control of these states will offer flexibility, where Harris will only need to win one more swing states (excluding Wisconsin) to cross the line.

Paths to victory for Donald Trump

With traditionally Republican states accounting for 219 votes, Donald Trump will need an additional 51 votes from the battleground states to secure his victory.

Given the larger amount of votes needed to cross the line relative to Harris, winning Pennsylvania may be crucial for Trump to ease his victory path in the likes of 2016.As long as Pennsylvania is under his belt, he will need to retain control of North Carolina (a state which backed Republican on 9 out of 10 past elections) and flip Georgia to meet the mark.

Failure to win over Pennsylvania may see Trump on an uphill battle, where he need to win almost all of the Sun Belt battleground states (North Carolina +15, Arizona +11, Georgia +16), along with one other traditional Midwest (Wisconsin +10 or Michigan +15).

What to watch on election day?

On election day, polls in Georgia, North Carolina and Pennsylvania may close slightly ahead of the rest. If the initial results were to show Kamala Harris having a win in at least two out of the three states, we may see markets starting to position heavily for a Harris presidency and that may be a trigger for some unwinding in the ‘Trump trade’. Being the state with the highest electoral votes, there is little doubt that Pennsylvania will be key in swaying the odds between the two candidates.

US Election 2024: Paths to Victory for Kamala Harris and Donald Trump_3

US Dollar Index: Highly sensitive to odds of presidential outcome

For now, the long-US dollar trades have taken a pause, with all eyes on an actual Trump victory this week, or particularly a Red Wave scenario, to validate the ‘Trump trade’. Failure to do so could see some unwinding, at a time where average year-end seasonality for the US dollar also tends to be bearish.

On the four-hour chart, the US dollar is attempting to regain some footing following a break below a near-term upward trendline support and its Ichimoku Cloud zone. We may need to see a move in its relative strength index (RSI) back above the mid-line to reflect buyers taking on greater control. Until then, further downside may leave the 103.10 level on watch next.

US Election 2024: Paths to Victory for Kamala Harris and Donald Trump_4

Nasdaq 100: Trendline breakdown remains in focus

The Nasdaq 100 index remains fragile for now, as the wait for more political clarity out of the US dampens market appetite for risk-taking. On the four-hour chart, the index has broken below an upward trendline, with the 20,166 level offering immediate resistance to overcome. On the daily chart, its daily RSI has also dipped below the mid-line for the first time since September this year, which denotes abating upside momentum for now.

Failure to overcome the trendline resistance may call for further unwinding towards the 19,875 level, followed by the 19,288 level. A move above last Thursday’s high may be warranted to denote buyers in stronger control. US Election 2024: Paths to Victory for Kamala Harris and Donald Trump_5

US Election 2024: Paths to Victory for Kamala Harris and Donald Trump_5

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Pepperstone

Economic

Political

WHERE WE STAND

I’ll keep this brief, given the long election preview below. Markets were for the most part subdued on Monday, with stocks treading water, and the dollar losing some modest ground, as attention remains firmly on the presidential election.

On that note, there was a further clearing up of positioning ahead of the ‘big day’, with some of the recent ‘Trump trade’ unwinding, partly as polls and betting odds continued to narrow, and partly as those that had been running said positions took profit ahead of the election itself. This dynamic was most evident in the Treasury complex, where yields from 7-30 years slipped over 10bp on the day, erasing the entirety of Friday’s late-day sell-off.

Still, there’s not really much value to be sought from a messy day of pre-election trade, so let’s turn to what awaits in the next 24-48 hours.

LOOK AHEAD

Election Day is finally upon us – here’s some thoughts on how the next day or so could well unfold.

I, and the remainder of the Pepperstone research desk, will be available throughout, including overnight; please don’t hesitate to reach out if there’s anything we can assist with.

First, a look at the current backdrop.

Uncertainty ahead of the election has seen the vast majority of market participants move to a more neutral stance over the last couple of weeks, helping to explain the back-to-back weekly declines in the S&P 500, and position squaring seen elsewhere. Conviction, understandably, has also been lacking of late, with few seeking to risk their YTD PnL over what is an incredibly finely balanced election, as risk management has become the priority, and should remain so.

Speaking of which, nationwide opinion polling, per the RealClearPolitics average, has Trump and Harris neck-and-neck on 48.5% and 48.4% respectively – well within the margin of error. Given the mechanics of the Electoral College, the election will likely be decided by the seven swing states (Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin). Here, the two candidates are also well within the margin of error according to almost all polls.

Betting odds, which have become an increasingly useful barometer of expectations, point to a slight advantage for Trump. Polymarket sees the race as 59% vs. 41%, while Kalshi (a site limited to US residents), has the race tighter, though still in Trump’s favour, at 57% vs. 43%. Whichever one metric chooses to use, the race seems too close to call with a high degree of conviction.

Let’s turn to election night itself.

Polls will begin to close from 7pm ET (midnight Wednesday morning in London), at which point news agencies, and TV networks, will begin to ‘call’ the race in each state. These calls are what markets will pay most attention to as the night progresses, with those in the aforementioned swing states being of most importance.

At least at the beginning of election night, when a final result is likely to be known will probably be of more importance than who the election winner might be. The longer that the process drags on, the more uncertainty increases, and the more that risk sentiment is consequently likely to deteriorate.

In terms of specific timings, the 2020 race was not officially called until the Saturday after election day, though the pandemic did complicate proceedings. In 2016, the election result was called around 2:30am ET/7:30am GMT on the Wednesday.

As already noted, swing states are key (electoral college votes in brackets):

Arizona (11 votes): polls close 9pm ET/2am GMT, counting begins an hour later; in 2020, the state was called at 2:50am ET/7:50am GMT;

Georgia (16 votes): polls close at 7pm ET/midnight GMT, counting begins immediately with mail-in ballots and early votes first; in 2020, the race was too close to call before the overall election result was announced;

Michigan (15 votes): polls close at 9pm ET/2am GMT, with the count likely to be completed by 12pm ET/5pm GMT on Wednesday; in 2020, the race was called at 6pm ET/11pm GMT on the day after election day;

Nevada (6 votes): polls close at 10pm ET/3am GMT, counting does not begin until polls close; in 2020, the state was not called until Saturday;

North Carolina (16 votes): polls close at 7:30pm ET/12:30am GMT, counting has already begun, though the impact of Hurricane Helene may delay some mail-in ballots; in 2020, the state was too close to call before the overall election result was announced;

Pennsylvania (19 votes): polls close at 8pm ET/1am GMT, with no ballots processed or counted until election day itself; in 2020, the state was called on Saturday, and tipped Biden over the 270 Electoral College votes needed to secure the presidency;

Wisconsin (10 votes): polls close at 9pm ET/2am GMT, with the count likely to conclude by 12pm ET/5pm GMT on Wednesday; in 2020, the state was called at 2pm ET/7pm GMT on Wednesday.

Let’s now break down the potential market impact of each potential presidential election winner.

A TRUMP victory would likely see markets focus on a theme of reflation, with tax cuts likely to provide a fillip to growth, and the imposition of tariffs giving rise to a potential resurgence in inflationary pressures. In terms of initial market reactions, one would expect:

USD upside, particularly against those currencies which could find themselves subject to tariffs, such as the MXN, CNH and EUR;

Treasury downside, most notably at the long-end of the curve, as growth and inflation expectations rerate higher;

Upside for equities, broadly speaking, amid expectations for a lower regulatory burden, with the Energy and Defence sectors likely to outperform.

Meanwhile, a HARRIS victory would represent a theme of continuity. In terms of initial market reactions, one would likely see:

USD weakness, as Trump-linked hedges are unwound, and trade-sensitive currencies breathe a sigh of relief;

Treasury downside, albeit not to the same degree as in a Trump win, on bets that fiscal policy will become more expansionary;

Knee-jerk equity downside, on concerns over potential for tighter regulation, though any dips are likely to be bought in short order, while sectors such as Clean Energy and Technology could outperform.

Of course, a significant degree of the above scenarios will also hinge on the makeup of Congress. Here, all 435 seats in the House of Representatives, as well as 34 Senate seats, are up for election. While also incredibly tight, state-level polling points to the Democrats flipping control of the House, and the Republicans (GOP) flipping control of the Senate.

Personally, I would rank the possible electoral outcomes, from most to least likely, as follows:

Trump Presidency, Divided Congress – ‘Divided Red Government’;

Harris Presidency, Divided Congress – ‘Divided Blue Government’;

Trump Presidency, GOP Congress – ‘Red Wave’;

Harris Presidency, Democrat Congress – ‘Blue Wave’.

Importantly, any of the ‘Divided Congress’ outcomes are likely to severely limit potential downside in the Treasury complex, given the constraint that a split congress would apply to either presidential candidate seeking a significant degree of fiscal loosening.

As a guide to what markets currently price in terms of likely trading ranges, we can use overnight implied volatility:

We can also zoom out, and use 1-week vols, as a guide for potential post-election moves, though this of course also covers Thursday’s FOMC decision:

Taking a step back, does the election change the longer-run macro, or market, outlook?

Here, I’d argue the answer is a resounding ‘no’. Certainly, in the case of equities, the three pillars of my longstanding bull case – solid earnings growth, strong economic growth, and the forceful ‘Fed put’ – should remain in place regardless of the party political allegiances of whoever occupies the White House.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Owen Li

Economic

Former President Donald Trump’s universal tariff proposals could cause prices to skyrocket on clothing, toys, furniture, household appliances, footwear and travel goods, according to a new report from the National Retail Federation.

The study, released on the eve of Election Day, adds to the pile of economic and industry analysis warning of the inflationary impacts of the Republican presidential nominee’s hardline approach to trade.

Trump has said he would impose a 10% or 20% tariff on all imports across the board. He has also floated tacking on a specifically high China rate of between 60% and 100%.

In both cases, the NRF found that the impact of Trump’s tariffs would be “dramatic” double-digit percentage price spikes in nearly all six retail categories that the trade group examined.

For example, the cost of clothing could rise between 12.5% and 20.6%, the analysis found. That means an $80 pair of men’s jeans would instead cost between $90 and $96. A $100 coat? That would cost between $112 and $121.

These new prices would squeeze consumer budgets, especially for low-income households that spend triple as much of their monthly budgets on apparel as high-income households spend, according to the Bureau of Labor Statistics.

The report found that the greatest price spikes could occur for toys: between 36.3% and 55.8%. The price of a $200 crib would also rise to between $213 and $219.

On the macro level, those price increases would also erode consumer spending. The report found that the more expensive retail goods would lead to a $46 billion decrease in purchasing power, if Trump imposes both universal tariffs and especially high China rates.

“Broad-based tariffs on the scale former President Trump has proposed will act as a massive tax increase on American families as they pay more for all imports, cutting into their purchasing power and thus weighing heavily on their spending and the overall economy,” Chief Moody’s Economist Mark Zandi told CNBC.

The report did not factor in Trump’s new proposal, announced Monday, to impose a 25% tariff rate on Mexico if the country does not impose stricter border regulations, which he announced at his rally in Raleigh, North Carolina.

Vice President Kamala Harris has capitalized on the economic criticism of Trump’s broad tariff plans, framing them as a “Trump sales tax” on American consumers. Instead, she favors a more targeted approach to the duties.

But many voters respond well to Trump’s tariff proposals, feeling that years of free trade decimated factory towns across America.

However, Trump’s tariffs during his first presidential term, including duties on foreign metals and washing machines, failed to raise the overall number of jobs in the relevant industries, a nonpartisan working paper found.

“If higher taxes are placed on these imports from China, their production will move to other less developed countries,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics.

Given the relatively higher wages in the U.S., Lovely said, “it is very unlikely that many jobs will be created in these industries.”

That means Americans won’t see additional jobs but will see prices rise.

Source: CNBC

To stay updated on all economic events of today, please check out our Economic calendar

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2024 FastBull Global Trading Contest Wraps Up, Revealing the Top Ten Traders!_1

After two weeks of fierce competition, the 2024 FastBull Global Trading Contest Season 1 has come to a successful close on October 31, 2024. We had an incredible turnout with 29,138 traders from around the globe, all demonstrating their outstanding trading skills and strategies in the FastBull community.

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Contest Account Profile of the 1st Place

2024 FastBull Global Trading Contest Wraps Up, Revealing the Top Ten Traders!_2

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Contest Account Profile of the 2nd Place

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Contest Account Profile of the 3rd Place

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Contest Account Profile of the 4th Place

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Contest Account Profile of the 10th Place

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FxPro

Economic

Commodity

Energy

Market Picture

Crude oil gained around 2.5% on Monday after OPEC+ reported that it intends to delay the cartel’s production quota increase by one month from December. The November 2023 agreement calls for eight major producers, including Saudi Arabia and Russia, to voluntarily cut output by 2.2 million bpd.

This is another attempt by the cartel to reverse the downward price trend that has been in place since April. The decline is being driven by macroeconomic factors such as a slowdown in China and sluggish European demand. On the supply side, production increases outside the cartel stand out, including the US, which has produced a record 13.5 million bpd over the past three weeks.

Natural gas inventories, the closest substitute for oil, are at a near four-year high. The moving average, which smooths out intra-year fluctuations, has reached the 2016 and 2020 highs, indicating a glut of hydrocarbons in the world’s largest economy.

The struggle between deteriorating macroeconomic sentiment and the cartel’s desire to reduce supply has been an important feature for much of this year and remains so at present. In addition to this, there is a strong growth in alternative energy sources, which is somewhat unusual at a time of relatively low oil and gas prices.

Technical Analysis

The rally at the start of the new week closed the negative gap we saw a fortnight ago following the Israeli strike on Iran. Some traders see the gap closing as a reason to sell again, especially as oil remains below the 50- and 200-week moving averages on a weekly basis, an important signal of a long-term bearish trend.

While economics usually trumps OPEC geopolitics in the medium term, the cartel’s continued efforts point to a ‘support’ price that the cartel is trying to hold. If it succeeds, key levels for the bulls will be $75 for WTI (the area of the October highs and the 50-week average) and $80 (a key round level also targeted by the 200-week average).

To stay updated on all economic events of today, please check out our Economic calendar

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Cohen

Economic

Political

Elon Musk's political group can keep awarding $1m (£722,000) to voters in swing states, a judge has ruled.

The giveaway by Mr Musk's America PAC is set to end on Tuesday, and the final recipient has already been determined, a lawyer for the billionaire said in a court hearing on Monday.

In a surprising turn, the lawyer revealed that people receiving the money have not been chosen randomly in a lottery-style contest, as many believed, but were selected by the group.

Philadelphia District Attorney Lawrence Krasner had sued to stop what he called an "an illegal lottery" after Musk announced he would give the money to one voter in a swing state each day until Election Day.

Pennsylvania Judge Angelo Foglietta did not immediately give a reason for the ruling, made a few hours after the hearing, according to the Associated Press.

“The $1 million recipients are not chosen by chance,” the lawyer, Chris Gober, said during the hearing, according to the Associated Press. “We know exactly who will be announced as the $1 million recipient today and tomorrow.”

Mr Gober told the court that America PAC has already determined the final recipient will be a voter from Michigan, US media reported.

On Monday, America PAC announced a man named Joshua in Arizona had been awarded the day's sum.

In a post on X, formerly Twitter, which Mr Musk owns, the group added: "Every day until Election Day, a person who signs will be selected to earn $1m as a spokesperson for America PAC."

But when the world's richest man unveiled the giveaway last month, many believed it was a random drawing for registered voters who signed a petition supporting the First and Second Amendments of the US Constitution.

“We are going to be awarding $1m randomly to people who have signed the petition, every day, from now until the election," Musk told a campaign event.

A few days later, the US justice department warned that the group could be breaking election laws, which forbid paying people to register to vote. Krasner's office sued to stop it.

Mr Musk has been aggressively campaigning for Republican White House candidate Donald Trump in swing states across the country, and his committee has been pushing hard in Pennsylvania, where polls suggest Trump is in a tie with his Democratic rival, Vice-President Kamala Harris.

A lawyer in Krasner's office told Reuters that Mr Gober's comments in court were "a complete admission of liability".

During the hearing, prosecutors played a video where Mr Musk, who is also the chief executive of SpaceX, said that "all we ask" is that the winners serve as spokespeople for the group, Reuters reported.

But Chris Young, the director of America PAC, said in court that the recipients are screened and must have values aligned with the group, US media reported.

Those who receive the money sign non-disclosure agreements that block them from publicly discussing the terms of their contracts, according to Reuters.

Mr Musk did not attend Monday's hearing.

Also on Monday, Joe Rogan released an episode of his podcast featuring a nearly three-hour interview with Mr Musk.

In a post promoting the podcast on X, he said he would be endorsing former President Donald Trump.

"He [Musk] makes what I think is the most compelling case for Trump you'll hear, and I agree with him every step of the way," Rogan wrote.

Source: BBC

To stay updated on all economic events of today, please check out our Economic calendar

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FOREX.com

Economic

The US dollar and yields have enjoyed a strong rally over the past five weeks, thanks to hotter US data, Fed members pushing back on rate cuts, and Trump leading in many polls. But with the US election on our doorstep and the potential for a delayed result, could this tie the Fed’s hands at this week’s meeting?

With Fed fund futures implying a 99.7% chance of a 25bp cut this week, it would come as an almighty shock to markets if they didn’t. And unlike other central banks such as the BOJ or SNB, the Fed tend not to surprise much these days. Instead they slowly shape their message to guide markets where they want, with various levels of success and of course failure. This means the Fed are very likely to cut this week regardless of the fact it lands on election week. However…

How the US Election Could Impact the Fed_1

Which way the election swings could dictate the Fed’s forward guidance

The bigger question for traders is if the Fed hint at another 25bp in December. While Fed fund futures imply they will cut in December with an 81.5% probability, those odds could very quickly plunge if Trump wins the presidency as his policies are deemed to be inflationary.

Besides, US economic data remains strong, and the case for higher rates becomes stronger if data continues to outperform overall.

The US economy remains robust, but there are bumps in the road

We know that US economic data has generally surprised to the upside in recent weeks. In fact it began turning for the better back in July according to the Citi Economic Surprise Index (CESI), with data falling shorts of gloomy forecasts through to October before it began to beat more favourable forecasts over the next five weeks. This saw traders drastically scale back their dovish Fed bets and sent the US dollar and yields soaring.

What has since excited doves is the weak NFP payroll last Friday, which saw a mere 12k job added (its lowest since the pandemic). Yes, that is a weak number, but unemployment remains low at 4.1% and average earnings also increased. This makes it tricky for the Fed to be too dovish this week in my opinion, especially if Trump wins.

How the US Election Could Impact the Fed_2

A Trump Presidency and the Fed:

At a fundamental level, Trump's policies are considered to be more inflationary. This implies that another Trump presidency could maintain the elevated levels of the US dollar and the yield curve, or even increase them, on the assumption that the Federal Reserve will need to keep interest rates higher for an extended period. This argument becomes even stronger if US data continues to outperform.

It could also be risk off for sectors and markets tied to trade, given Trump plans to slap a hefty 60% tariff on China’s imports, alongside less chunky tariffs for other trade partners;

Technology, manufacturing, energy, healthcare and consumer goods stocks could fade selling pressure from Wall Street;

USD/CNH could outperform as the USD rallies and China allow their currency to weaken in an effort to maintain competitive for trade;

This could spell trouble for AUD/USD (and therefore NZD/USD) which currently share a strong correlation with the yuan.

How the US Election Could Impact the Fed_3

A Harris Presidency and the Fed:

Conversely, a Harris win could weigh on the USD and yields, as it could allow the Fed more wriggle room to cut in the face of weaker data. I suspect it could also trigger a risk-on rally which should be supportive of commodities and therefore commodity currencies.

AUD/USD and NZD/USD could lead gains against the US dollar in a risk-on bounce;

Wall Street indices are likely to perform, led by the Nasdaq 100 as part of a relief rally;

Copper could bounce alongside other base metals on the aversion of a trade war;

USD/CNH could turn lower as Beijing sighs in relief that another trade war is less likely to materialise.

But what if they election results take too long to arrive?

If neither candidate has secured the 270 votes by Thursday to secure their place in the Whitehouse, the Fed may need to revise their message. And I suspect the Fed will keep their cards close to their chest and not feel inclined to be too dovish if they cut, assuming that they do at all.

Conclusion

A Trump win could seriously hamper the Fed’s ability to cut again in December;

If the election drags on and we do not know the winner by Thursday, the Fed may feel inclined to keep the lid on any forward guidance;

And knowing markets, that will be taken as ‘no cut for Christmas’ and potentially send the USD higher;

A Harris win could allow the Fed to deliver a dovish cut, prompt a risk-on rally for commodities, commodity FX and Wall Street.

To stay updated on all economic events of today, please check out our Economic calendar

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US Election 2024: Paths to Victory for Kamala Harris and Donald Trump

Overview

Paths to victory for Kamala Harris

Paths to victory for Donald Trump

What to watch on election day?

US Dollar Index: Highly sensitive to odds of presidential outcome

Nasdaq 100: Trendline breakdown remains in focus

Presidential Election Day Arrives

WHERE WE STAND

LOOK AHEAD

Trump’s Tariffs Could Trigger ‘Dramatic’ Price Spikes on Clothes, Furniture, Warns Retail Group

Source: CNBC

2024 FastBull Global Trading Contest Wraps Up, Revealing the Top Ten Traders!

OPEC+ Continues To Actively Support Oil Prices

Market Picture

Technical Analysis

Elon Musk Can Keep Giving $1m to Voters, Judge Rules

Source: BBC

How the US Election Could Impact the Fed

Which way the election swings could dictate the Fed’s forward guidance

The US economy remains robust, but there are bumps in the road

A Trump Presidency and the Fed:

A Harris Presidency and the Fed:

But what if they election results take too long to arrive?

Conclusion

Risk Disclosure