How will the US Presidential Election impact Global Trading?

With things gearing up towards the upcoming US Presidential Election, it's worth looking into how this is likely to impact trading companies, until the outcome is announced.

In February, David Broomfield - Multi-Asset Strategist from Coutts - notes in his article how will the us election affect investment markets how important this is for investors and the impact that is likely to have on the market.

"It’s therefore perhaps inevitable that, when assimilated by modern times, this original text would create what many see as a political lack of stability today. It enables relatively small pockets of the US population to have a disproportionate influence.

But however the election unfolds, when it comes to markets, a resilient economy and positive outlook should mean the US presents a relatively positive story for global investors this year."

Margarethe Taucher - Manager of Trade Policy & Strategy at EY, suggested in her article last week, "The trade risks associated with the 2024 elections are significant. The predicted trend towards nationalist policies is expected to hinder global trade through the introduction of tariff increases, potentially leading to inflation and a slowdown in export growth" How the 2024 elections could reshape trade climate and geopolitics

Markets often react to uncertainty surrounding elections. Once the election results are known, there could be a period of volatility as investors adjust to the new political landscape. If the results are perceived as favorable for economic stability and growth, trading risk might decrease. Conversely, unexpected outcomes or policy changes could increase uncertainty and risk.

Asset classes such as Equities - over the longer term - tend to respond positively to political stability and policies perceived as favorable to economic growth. Bond prices typically fall when yields rise, so if the winning candidate's policies are perceived as inflationary or expansionary, bond yields may rise, leading to lower bond prices. Currency markets can be particularly sensitive to election outcomes, as they reflect investors' perceptions of economic and political stability. The outlook for commodities can be influenced by a variety of factors, including changes in demand driven by economic growth prospects and shifts in currency valuations.

Regardless of the election's result, investors are urged to remain vigilant, as market sentiment and behavior may present opportunities for growth amid uncertainty. By staying informed and adaptable, individuals and businesses can navigate market fluctuations and potentially capitalize on emerging trends.