Kamala Harris winning the coming US Presidential elections will be good for markets, says Vasu Menon, managing director of investment strategy at OCBC.
Menon, who wrote last week that the attempted assassination of US Presidential candidate Donald Trump “has boosted his chances of victory significantly”, now thinks Harris could make it “much harder for Trump to win”. Granted, that is contingent on Harris being officially nominated at the Democratic National Convention (DNC) between Aug 19 and 22.
Trump is currently polling ahead of Harris, but the margin is “not significant”, writes Menon in a July 22 note, and things could change. “Trump is getting a lot of positive media publicity and may be ahead in opinion polls for now, but there are no guarantees he will win. Opinion polls can swing.”
In any case, the US electoral register shows 49% are Democrats and 48% are Republicans, so a lot now hinges on how Harris performs and on voter turnout on election day, says Menon. “In the US, voting is not compulsory and so voter turnout can make a big difference.”
There are about three more months before the US elections, but three months can be a long time in US politics, says Menon, long enough to swing the pendulum either way.
“A victory by Harris will be good for markets in that under Democratic rule, the Fed can continue to cut rates unhindered; there is political continuity and less policy uncertainty,” he writes.
See also: What does Trump’s shooting mean for markets?
Just last week, Trump warned US Federal Reserve chair Jerome Powell not to cut US interest rates before November’s presidential vote. Speaking to Bloomberg, Trump said the central bank would “maybe” cut interest rates before the election on Nov 5, but added “it’s something that they know they shouldn’t be doing”.
Thumbs up
US futures are now in positive territory and seem to be giving the thumbs up to Biden stepping down, says Menon. “All eyes will now be on the DNC next month to confirm Harris’ nomination as presidential candidate. Until then, there may be some nervousness and uncertainty still about whether she will be able to secure enough delegates to get an official nomination.”
See also: Biden exits race, endorses Harris after weeks of pressure
As the vice-president, Harris will have access to all of Biden’s election funds — a positive for her camp. However, what Harris lacks is name recognition among voters, says Menon. “The fact that she is VP helps her and the fact that she has been at the side of President Biden during the election campaign helps as well.”
At the moment, Trump has a slight edge over Harris, but investors need to be ready for surprises, says Menon. “This is the constant seen so far in 2024; nothing should be taken for granted.”
Having a resilient portfolio is the right strategy, he adds. “Concentrated positions should be avoided, particularly in technology. Equities exposure should be positioned for a broadening of the market performance to non-technology sectors. Gold offers a hedge against volatility.”
Read more about Biden’s exit from the US Presidential race:
- Biden exits race, endorses Harris after weeks of pressure
- How investors are reacting to Biden dropping out
- Harris ’well-positioned’ to capture Democratic nomination: UBS
