US Elections: Financial markets appear to be positioning for a Donald Trump victory and Republican dominance in the upcoming November 5 US presidential election, despite the race remaining undecided, according to an ET report.
Analysts suggest that a Kamala Harris victory would maintain current economic conditions with minimal market impact, while a Trump win could significantly affect emerging markets, equities, and currencies through reduced globalization policies.
“If Trump is elected as President, it could imply higher rates, gold prices, and global USD regime than our base-case forecasts, while crude prices could be lower. A Harris victory could mean that the markets could trade closer to our base-case projections with rates likely to ease and global USD to trade flat,” ICICI Bank’s head of economic research Sameer Narang said.
Financial experts indicate that among emerging economies, India could benefit from a Trump presidency due to its domestic consumption-focused growth, potential advantages from reduced commodity prices, supply chain alterations, and foreign relations.
Potential Effects of Trump’s Victory on India
A Trump administration’s restrictive trade policies could sustain strong US growth, potentially leading to Wall Street’s superior performance compared to global markets.
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This scenario could trigger increased yields, particularly in long-term securities, as investors anticipate higher supply. ICICI Bank analysts predict stronger US dollar performance, decreased Brent crude prices, lower global base metal prices affecting Chinese growth, and elevated gold prices due to increased safe-haven demand.
ICICI Bank projects that with Trump’s victory, the US 10-year Treasury yield could reach 4.40%-4.50%, while the Dollar Index might rise to 105-106, potentially reaching 106.50 by December 2024.
Nomura’s analysis suggests India’s predominantly domestic demand-driven economy would experience limited negative effects from slower US growth.
According to Nomura’s Sonal Varma, India could actually benefit from reduced commodity prices resulting from decreased Chinese growth and lower oil prices, influenced by increased fossil fuel production.
A decrease in crude oil prices would benefit Indian oil marketing companies including BPCL, IOCL, and HPCL, while potentially negatively affecting ONGC, Oil India, and GAIL.
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Potential Effects of Harris’s Victory on India
A Harris victory in the election would likely maintain current global and US economic structures, with expectations of a gradual economic alignment between the US and other nations influencing mid-term market dynamics.
ICICI Bank indicates that various financial markets, including equities, energy, gold, base metals, and the US dollar, would likely remain stable without significant fluctuations.
“In case of a Harris victory, we see the UST 10yr moving to the 4.00%-4.10% range and the DXY trading in the 101.50-103.50 range by December 2024. Global commodity prices could trade flat if Harris wins,” it said.
India’s export performance to the US could benefit under Democratic leadership, considering the positive trade relationship during Biden’s administration. According to Phillip Capital, Harris’s anticipated support for skilled immigration policies would benefit India’s IT sector.
Historical US Market Performance Analysis:
The Dow Jones, excluding recession-related declines, increased 28% under Bush, 78% during Obama’s presidency, and 54% under Trump, while Biden’s current term shows 41% growth.
The Indian markets showed substantial growth during different US presidencies: Bush’s term saw a 200% increase, Obama’s presidency witnessed 55% growth, Trump’s tenure recorded 63% gains, and Biden’s administration has achieved 89% growth so far.