As Americans vote for the next president, the Federal Reserve provided more insights on interest rate trends at its monetary policy meeting, with dual potential market-affecting events expected in the coming week.

The November 5th election marked the end of an election cycle that attracted national attention and triggered fluctuations in various corners of the financial markets. This includes the rise and fall of so-called Trump trades, where a series of asset price fluctuations reflected strong sentiments towards the competition between the Republican Donald Trump and the Democrat Kamala Harris for the position of the President of the United States.

These trades involve the rise of the US dollar and the selling of US Treasury bonds (likely driven by strong economic data), as well as the surge in Bitcoin (fueled by hopes that Trump will relax regulations on the cryptocurrency industry).

Nevertheless, public opinion polls remain deadlocked, with bets leaning towards Trump narrowing over the weekend. Some investors expect that regardless of the outcome, next week's elections will come with volatility.

Walter Todd, Chief Investment Officer at Greenwood Capital, stated: "Whichever way it goes, there seems to be some short-term risks."

Todd mentioned that a Republican victory could become a "sell-the-news" event, triggering profit-taking in Trump trades. He mentioned that a Harris victory might lead to more severe liquidations.

Control of Congress will also be determined in Tuesday's vote, posing another dilemma for investors as they weigh how various political outcomes will impact long-term assets, with the two candidates offering distinctly different paths for the US economy.

For instance, Trump's expectations of reducing regulations are poised to benefit banks, while increased tariffs could benefit small stocks focusing on the domestic market, while raising volatility in the broader markets.

Analysts say that Harris' expected support for clean energy plans could lead to a rise in solar energy and other renewable energy stocks if she wins.

Investors are also concerned about the volatility of election results, as results may not be immediately clear due to intense competition or controversy. In 2020, Trump attempted to overturn his loss to President Biden by falsely claiming voter fraud in multiple states.

"The market performed well during Trump's presidency. The market also performed well during Harris' presidency," said Robert Pavlik, senior portfolio manager at Dakota Wealth. "We just need clarity."

Federal Reserve Meeting

The Fed's decision on monetary policy will be another risk for the S&P 500 index's approximately 20% increase this year. However, mixed earnings of several tech giants this week led the index to close lower by the end of October after five consecutive months of gains.

Data from the London Stock Exchange shows that federal funds futures trading indicates the market expects a slight 25 basis point cut in the benchmark policy rate by the Fed, following the first rate cut in four years by the Fed in September.

For many investors, the focus will be on Fed Chair Powell's guidance, including whether the central bank will consider pausing the rate-cut cycle in future meetings given the strong economic data.

Citigroup's Economic Surprise Index measures the comparison between economic data and expectations, currently at the highest level since April. This week's data shows the U.S. economy grew at a slow pace of 2.8% in the third quarter.

Friday's monthly employment report released before the Federal Reserve meeting is the last key data point, contrary to this trend, the report shows nearly stagnant job growth in October. However, strikes in the aviation industry and the impact of hurricanes have affected the response rate of the employment survey, casting a shadow over the data.

JPMorgan economist Michael Feroli stated in a report: "This week's data... suggest that the reasons for rate cuts are still valid." "Even if the election results are decided before Thursday, we believe there is still enough uncertainty in the outlook to warrant caution from the Federal Reserve in providing forward guidance."