US in pole position across global headlines. 🇺🇸 Nearly half the world’s population votes in democratic elections this year. Americans are among them, taking to the polls on 5 November, with the President Elect sworn into office in January 2025 to serve a four-year term. 

Vice President Kamala Harris is likely to replace Biden on the Democrat ticket this August. Meanwhile, Wall Street commentators have weighed into ‘Trump trades’ — which is what a Donald Trump win could mean for the American economy — and the uncertainty of ‘Trumponomics’ — the economic impact of Trump’s proposed tax cuts, trade tariffs and immigration crackdown, which are all considered inflationary. 

Regardless of who is the next US president, according to Plancorp chief investment officer Peter Lazaroff, who used nearly 100 years of the S&P 500 performance, there’s ‘no conclusive evidence to suggest the president’s party has any statistically significant impact on US stock market returns’. 

When it comes to sentiment vs. performance in the elections since the 1950s, however, US presidential elections have inversely affected US share markets as measured by the S&P 500:

‘Historically, a transition from a Democrat to a Republican US President has been seen as positive for the stock market, despite the S&P 500 growing at an average annual rate of 9.8% under Democratic presidents and 6% under Republicans since 1957.’ — Chris Smith, CMC Markets managing director, 1News

JPMorgan Global Investment Strategist Shawn L. Snyder has also busted three election myths:

• Stocks perform poorly in election years — Not quite. The difference is only very slight, with the S&P 500 (since 1928) performing on average up 7.5% during presidential election years, and 8.0% in non-election years
• Depending on who wins, share markets may drop — While yes share markets can be volatile (at any time), the economic factors at the time of an election have a more significant impact on share markets, such as the 2008 Global Financial Crisis, and the Covid pandemic in 2020 
• The Fed won’t change interest rates in an election year — The Fed acts independently from the presidential electoral cycle and can lift or drop interest rates during a presidential election year. It typically hasn’t done so in the two months leading up to the vote, however

Moody’s US inflation prediction for 2025

Could the mood sour in 2025? 😣 Credit ratings firm Moody’s has issued predictions about whether Biden vs. Trump policies could drive inflation up or down. Moody’s report Assessing the Macroeconomic Consequences of Biden vs. Trump considered four election probabilities (none that included a Biden withdrawal). Moody’s projections indicated a Trump economic agenda — those Trumponomics — may hike annual inflation to 3.6% next year, while a Democrat win that maintains Biden’s current policies could drop inflation rates to 2.4% in 2025.

‘If consumers “are upset now, they will be hopping mad a year from now” about inflation if Trump wins and enacts his policies’. — Mark Zandi, Moody's Analytics chief economist and the report co-author, also a former campaign advisor for both parties, CBS MoneyWatch

Trump: Trade, Tech, Taiwan and China

How would an ‘America First’ policy affect US global relations? 🌎 Trump has long held an ‘America First’ policy — being tough on immigration and hefting trade tariffs to benefit the US economy. 

Trump also told Bloomberg Business this July that Taiwan should pay for US defence. This may have contributed chipmaker Taiwan Semiconductor Manufacturing (TSM - ADR) stock tumbling 15.3% since 11 July following President Biden’s gaffe calling Ukraine's President Volodymyr Zelensky ‘President Putin’, taking with it some Big Tech stocks, including Nvidia (NVDA) dropping 14.1%, Alphabet (GOOGL) down 9.4%, Amazon (AMZN) falling 6.4% and Microsoft (MSFT) down 6.6%.

Trump’s Vice Presidential running mate JD Vance has also called out China, telling Fox News that China is ‘the biggest threat to our country’. In his nomination acceptance speech, Vance said the US ‘was flooded with cheap Chinese goods, with cheap foreign labor, and in the decades to come, deadly Chinese fentanyl’. 

Some China commentators have said the impact on the China relationship is less about the president, and more about the president’s team, and neither fare well.

‘Chinese experts have publicly proclaimed that whoever the winner is, both candidates are “poison” for China. Trump’s position on US alliances and partnerships and the damage he might cause serves Beijing’s strategic agenda in the long run. Yet in the short term, Trump’s unpredictability and his use of maximum pressure will put China in extremely difficult corners, making him the less desirable option from China’s perspective.’ — Yun Sun, Global Economy and Development Fellow, John L. Thornton China Center, Brookings

Could Trump take control of The Fed?

Is future US monetary policy under threat? 💸 During his Presidential term, Trump was openly critical of The Fed and chair Jerome Powell for driving rate hikes — now potentially headed towards rates easing later in the year. According to the Wall Street Journal, some of Trump’s political allies have unofficially laid a potential path for a level of presidential control of the US central bank. 

Currently, the US President nominates The Fed chair, but they don’t have a hand in monetary policy. Legally, however, whether a president could unseat The Fed chair is untested. 

Trump told Bloomberg in June that while he doesn’t plan to contest Powell completing his second four-year term, which ends in May 2026, he’s unlikely to reappoint him. Yet in a May Bloomberg readers’ survey, 44% of respondents said they’d expect a second Trump presidency would lead to a reduction in The Fed’s autonomy.

But Trump is historically a stock market man, so he’d likely be aware that any forced changes could end up in a legal battle, and potentially lead to ‘a crisis situation’ in US and global economics:

‘Ambiguity around who is in charge of the most important central bank in the world would surely shake stock and bond markets — hardly something a president wants to see.’ — Neil Irwin, chief economic correspondent, Axios

Trump’s crypto agenda

Making crypto ‘great again’? 🤑 Following Trump being shot this July, Bitcoin USD (BTC-USD) has rallied nearly 16%. This weekend, Trump told Bitcoin Conference delegates he’d make America ‘the crypto capital of the planet and bitcoin superpower of the world’. He laid out his preference for holding the current crypto reserves ‘to keep 100% of all the bitcoin the US government currently holds or acquires into the future’, without committing to an official bitcoin strategic reserve, as promised a day earlier by Presidential candidate Robert F. Kennedy Jr. 

Conspiracy theorists swarm around million dollar short

Coincidence, conspiracy or clerical error? 👨‍💻 BlackRock and Vanguard have landed in the spotlight as high profile investors of Austin Private Wealth. The investment firm ‘carried out a massive short sale on 12 million shares of Trump Media & Technology Group (DJT), just one day before the attempted assassination attempt on Trump.’ Claims of a conspiracy - that ‘BlackRock knew that Donald Trump was going to get assassinated before it actually happened’ — have been dismissed, with Austin saying the order was ‘filed in error’. 

When the Democrat’s confirm Harris as the Democrat ticket and policy plans roll in, projections are likely to move again. Until then Chris Smith’s zoom out may help concerned investors:

‘Ultimately, earnings and market fundamentals will continue to matter more than political changes as companies adapt… Trump’s political bravado will continue to shake the market from time to time, but ultimately the business fundamentals will always trump Trump in the longer term.’ — Chris Smith, CMC Markets managing director, 1News

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