Election Impact on Markets

Investing.com – A victory for Donald Trump would move markets, but not as significantly as his surprise victory eight years ago, according to analysts at BCA Research.

Trump, the Republican Party candidate, and Democrat Kamala Harris were campaigning vigorously across key battlegrounds on the final day before the vote to secure last-minute support. Both candidates are in a virtual tie leading into Election Day, particularly in crucial swing states that will likely impact the vote's outcome.

Traders will closely monitor the returns, as the winner's policies could significantly influence various sectors, including oil and gas, Big Tech, electric vehicles, and financial services.

In a client note on Tuesday, BCA Research analysts highlighted the potential for "high" volatility as markets react to the results. They believe long-term investors should prepare for a possible "Red Sweep," which would see Trump win and Republicans gain control of the US Congress. This scenario could lead to significant changes in immigration, taxes, and tariffs.

The analysts recommend investors buy equities over bonds, focusing on small-cap shares, materials companies, and the US dollar if a Red Sweep occurs. They also suggested trading against a potential sell-off in US Treasuries, noting that Trump's proposed income tariffs could pose a risk to global growth. Treasuries are considered a safe-haven asset in economic turmoil.

Alternatively, the analysts predict that the most likely outcome could be "Blue Gridlock," where Harris wins, but Republicans control the Senate. In this case, investors should buy bonds over equities, sell the dollar, and invest in the Mexican peso and Eurozone equities. They also advise remaining "long duration" on developing market bonds and investing in emerging market stocks.