The results of the 2024 U.S. presidential election will be announced in a few weeks, undoubtedly having a significant impact on the global financial markets.

Currently, the two presidential candidates are still neck and neck. A recent poll found that in seven swing states in the U.S., Harris leads with a slight advantage in Arizona, Michigan, Wisconsin, and Georgia, while Trump has a slight edge in Nevada, North Carolina, and Pennsylvania. This means it is still difficult to determine the outcome.

But for investors, the focus is more on what policies Harris and Trump will adopt, and what impact they will have on the financial markets.

Economists believe both will implement certain trade protection policies, but Harris will implement targeted tariffs, while Trump tends to adopt more aggressive and destructive policies.

Forex Market

On the forex market, trade tariffs are crucial for the most actively traded currencies globally. If Trump wins, implying a universal tariff hike, the euro may be at a disadvantage.

BlueBay Asset Management Chief Investment Officer Mark Dowding stated that if Trump wins, the euro against the dollar will fall to just under 1.05 dollars, but if Harris wins, the euro against the dollar will move in the opposite direction, rising above 1.15 dollars.

Furthermore, geopolitical risks, especially in the Middle East, can lead to soaring oil prices, damaging economic growth, and making the euro more vulnerable.

ING Groep pointed out that Trump's victory could also harm the Australian dollar and New Zealand dollar, as these two currencies represent the economic value of Australia and New Zealand, and imposing tariffs could damage the commodity exports of these two countries.

The Swedish Krona and Norwegian Krone are also considered to be susceptible to global trade dynamics, and if Harris's victory is seen as unfavorable to the U.S. economy, then the Canadian dollar may suffer losses.

European and American markets

For the European stock market, Trump's victory may cause trouble for export-intensive industries, especially German auto manufacturers such as BMW, LVMH, and other luxury goods manufacturers, as people are concerned about trade tensions resurfacing.

Barclays warned that if trade conflicts reignite, European corporate profits may see a 'high single-digit' percentage decline. Trump has proposed a plan to impose 10-20% tariffs on almost all imported goods to bolster U.S. manufacturing.

On the other hand, a Harris victory would be a relatively better outcome for European stock markets. This could drive the development of wind power, which could be a boon for utility companies with large American projects, such as Orsted and Iberdrola.

However, in the long term, Harris's plan to increase corporate tax from 21% to 28% could curb the profits of U.S. and European companies. The prospect of Trump lowering corporate taxes may be welcomed on both sides of the Atlantic.

In his speech this week, Trump reiterated some of his previous proposals, such as reducing the corporate tax rate of certain domestic manufacturers to 15% and providing quicker commercial deductions for equipment purchases. He also promised to lower the taxes of U.S. citizens living overseas.

Moreover, this election may have an impact on the Ukraine war. Some Republicans in Congress, including Trump, question the value of providing funds for Ukraine to combat Russia, while Democrats support providing strong aid to Ukraine. Trump's victory may suppress aerospace & defense stocks, but considering his support for Israel, the U.S. getting involved in Middle East conflicts may further stimulate the rise of these stocks.

Emerging markets

In the past decade, emerging market stocks have underperformed stocks in developed countries for most of the time. However, in recent times, emerging market stocks are ready to shine. This is because the Federal Reserve has begun to cut interest rates, and the prices of the U.S. dollar, food, and fuel are declining, which is a huge stimulus for importing countries.

A Harris victory means current policies will be broadly continued, which could be beneficial for emerging market assets. However, Trump's victory, along with the implementation of global tariffs, could have a serious impact on any excessive optimism. Most investors believe that Mexico, which has strong trade ties with the U.S., will suffer the most.

JPMorgan advises investors to maintain a neutral stance until the risks of the U.S. election pass. UBS Group warns that if Trump's tariff policies are implemented, it could lead to a sharp 11% drop in emerging market stock prices.

UBS also mentioned that their emerging market risk preference index is close to a 15-year high, indicating that investors may not have fully considered the downside risks of Trump's tariff policies on emerging market assets.

Editor/rice