The upcoming U.S. presidential election is a contributing factor to market uncertainty. Recently, markets, which had performed exceptionally well throughout the year, experienced a slight downturn with the S&P 500 Index decreasing by nearly 1% in October. The election race appears to be tightly contested between Vice President Kamala Harris and former President Donald Trump, adding to the market’s uncertainty.
Billionaire investor Ken Griffin, however, anticipates that the market will reach new all-time highs following the election. Griffin argues that the resolution of uncertainty typically benefits asset prices. As a CEO of Citadel, one of the world’s largest hedge funds, his insights carry weight on Wall Street. This week, during the Future Investment Initiative forum in Saudi Arabia, Griffin stated that the current level of uncertainty due to the election is significant. He suggests that once a new regime is established, whether it’s led by Harris or Trump, investors will likely see a positive shift in the market.
There are contrasting economic implications depending on the election outcome. Trump’s presidency might maintain lower corporate taxes and extend previous tax cuts, although his plans for tariffs could have mixed global economic effects as seen during his first term. Conversely, Harris is expected to propose raising corporate taxes and adjusting certain taxes on wealthy individuals while implementing measures aimed at supporting low- and middle-income groups, which could potentially enhance GDP.
The election’s outcome could also affect various sectors, including cryptocurrencies, banking, home building, and electric vehicles. Investors may be repositioning or hedging their portfolios based on predictions of the election results, while others might be waiting for the election uncertainty to pass.
Research by Vanguard indicates there may not be a significant statistical correlation between market performance and presidential election years. Numerous factors influence the market, making it difficult to attribute performance to the election alone.
In the coming weeks, markets are expected to experience volatility driven by the election, the Federal Reserve meeting, and global geopolitical issues. Nevertheless, the conclusion of the election could remove a significant source of uncertainty, potentially enabling the market to continue its upward trajectory and achieve new highs. Long-term investors are advised not to be overly concerned with short-term volatility but to comprehend its causes to make informed decisions.
