By Lewis Krauskopf, Suzanne McGee
NEW YORK- Global investors were on edge as voting in the US election entered its final stretch on Tuesday, drawing to a close a dramatic campaign that has moved bonds, stocks and other assets in recent months and could further sway markets as results become clearer.
One of the most unusual – and tightest – presidential elections in modern US history could have starkly different outcomes for tax and trade policy, as well as for US legal and democratic institutions, depending on whether Republican candidate Donald Trump or Democratic candidate Kamala Harris prevails.
The results, which were due to start trickling in later on Tuesday evening, could rattle assets globally and determine the outlook for US debt, the strength of the dollar and a host of industries that make up the backbone of Corporate America.
“This is the most significant election that I have seen in my career,” said Mike Mullaney, director of global markets research at Boston Partners, who has worked in investment management for over 40 years. “It’s going to be very bifurcated.”
With polls showing a dead heat between the former president and the current vice president, and control of the US Congress also to be decided by wafer-thin margins, investors are wary of prolonged vote counts and contested results that could fuel volatility. The final outcome for both the presidency and Congress could take days to be revealed, according to analysts.
As votes start to be reported, investors will focus on tallies from a handful of bellwether counties that could indicate early clues about the winner. But many of the seven battleground states that will decide the race may not have meaningful results until later in the night.
Despite election-year uncertainty, a rally in US stocks has pushed the S&P 500 to record highs in 2024, with a 21 percent year-to-date run, driven by a robust economy, strong corporate profits and interest rate cuts from the Federal Reserve.
On Tuesday, the S&P 500 closed up 1.2 percent on strong economic data, while assets whose recent price swings have been linked to Trump’s standing in polls and betting markets put in a mixed performance. Several measures of demand for protection against outsized currency market movements rose to their highest levels since the November 2016 election.
Joe Mazzola, head of derivatives and options trading at Charles Schwab, said the real test for markets would likely come on Wednesday morning as traders began to digest the results, adding that Tuesday was “the calm before the storm.”
JPMorgan Chase Bank of America Citigroup and Wells Fargo gave employees several hours of paid time off to vote, while some lenders underscored the need to work across political lines following a divisive election cycle.
“Soon it will be time for all of us to unite behind our President elect and all of our national leaders,” JPMorgan CEO Jamie Dimon said in a statement on Tuesday.
“We must begin the work of bringing our nation together and focusing on the pressing economic and global issues before us.”
Bets on the election outcome have had a hand in swaying markets. Spurred on by Trump’s gains in polls and popular betting markets, some traders have taken positions in assets that could be influenced by the former president’s pledges to raise tariffs, cut taxes and decrease regulations.
Those so-called Trump trades include tumbles in the Mexican peso which could be hit by tariffs, wild swings in the shares of Trump Media and Technology Group and rallies in industries that could benefit from looser regulation, such as regional banks and bitcoin.
Yields on Treasuries – which move inversely to bond prices – have also risen, as investors price in potentially higher inflation, another projected consequence of Trump’s policies.
“The market is getting pulled and pushed in different directions here as investors try to price in a lot of unknowns,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management.
Trump Media shares ended down about 1 percent after surging as much as 19 percent in a volatile session, while bitcoin was up nearly 4 percent as betting markets leaned in favor of Trump, despite the absence of new catalysts.
“People who back the former president tend to be quite enthusiastic,” said Steve Sosnick, market strategist at Interactive Brokers. “This is their last opportunity to express that enthusiasm in the market.”
