Navigating the Stock Mrket Amidst the 2024 Presidential Election

Navigating the Stock Market Amidst the 2024 Presidential Election

Date: November 4, 2024

Subject: Stock Market Outlook Post-Election 2024: Harris vs. Trump

Introduction: As we approach the conclusion of one of the most dramatic presidential races in history, investors are watching the very tight polls, but the polls have not been reliable in the past. Therefore, I believe the stock market's pulse is a much more reliable indicator. The S&P 500 Index is up 22% year to date. The rest of this investor letter will dissect how the stock market might react depending on whether Kamala Harris or Donald Trump wins tomorrow, on November 5th.

Kamala Harris's Victory:

• Economic Policies: Harris's campaign has emphasized investment in traditional industries like steel, iron, and automobiles, alongside a focus on new technology. If historical trends hold, a Democratic win might initially lead to a sell-off in the stock market due to expectations of higher taxes on corporations and the wealthy.

• Market Sentiment: The volatility index – Vix, has been moving higher over the last two months, which indicates a concern that there may be some initial volatility after the election due to uncertainties over policy changes.

• Interest Rates and Regulation: Anticipation of tighter regulations and potential increases in corporate taxes would likely pressure stocks in the short term. Nevertheless, sectors like healthcare, education, and green technology could benefit from increased government support and further progress on lowing interest rates from the FOMC later this week.  

Donald Trump's Victory:

• Economic Policies: Trump's return would indicate a continuation of tax cuts for individuals and businesses, which historically have been very positive for the stock market. His focus on reducing regulations and promoting domestic production could be very supportive to sectors like energy, manufacturing, technology and finance.

• Market Sentiment: The market seems to be treading water until the election results are known. However, to me, it feels like the stock market will rally higher if Trump can achieve and uncontested victory due to a more pro-business environment with lower taxes and a deregulation agenda. Sectors like oil and gas, defense, and traditional manufacturing could see an uptick due to Trump's policies favoring these areas.

• Uncertainty and Trade: Trump's approach to trade, particularly tariffs, could introduce volatility. If new tariffs or trade wars escalate, this could detrimentally affect multinational companies and consumer goods sectors due to increased costs.

Other Election Factors:

• Federal Reserve's Role: Regardless of who wins, the Federal Reserve's policies might play a more decisive role in market movements than the election itself in the short term. Investors should watch for any signals on interest rates closely. The current consensus among several leading economists is for the FED to lower rates by 25 basis points on Thursday, Nov. 7th.

• Split Congress: A split or closely divided Congress could lead to a stalemate in passing major legislative changes, potentially tempering market reactions by reducing the chances for immediate policy shifts.

• Long-term vs. Short-term: While short-term reactions might be driven by who wins the Presidential election. The longer-term direction for the stock market will be driven by the FOMC policy expectations and how it will affect global economic trends.

Investment Strategy:

• Diversification: Broadening investments across different asset classes is always recommended. Current asset allocations should favor gold and silver, Bitcoin, energy, technology and defense.

• Sector Rotation: Being prepared to rotate investments into sectors that align with the winner's policy could optimize returns. For instance, renewable energy under Harris or traditional energy under Trump.

Conclusion: The 2024 election's outcome will undoubtedly influence the stock and bond markets increasing the chances for increased volatility.  Whether it's Trump or Harris, each scenario presents different opportunities and risks. Actively managing these risks and opportunities is what I do for all my clients. By using a disciplined allocation approach to keeping a balanced portfolio, we will be strategic in optimizing portfolio returns post-election.

To discuss this article or any other investment related matters, please visit www.smladvisory.com.

You can also email Shawn Loddy at shawn@smladvisory.com

Disclaimer: This newsletter provides general investment advice based on current insights but does not constitute personalized financial advice. Always consult with financial advisors for decisions tailored to your circumstances.