Source: Jin10 Data
Author: Wu Yu.

Citigroup analysts stated that elections often have a significant impact on market trends before the vote, but traders this year seem to be more focused on other matters.

Analysts pointed out that several market indicators that usually flash before the US elections are noticeably calm this year, indicating concerns about the election's impact on the market may be less than in previous years.

They believe that traders are not focused on the election, but on the US economy and earnings season.

In a report on Monday, Citigroup analysts said, "Before the US election, the stock market's performance is inconsistent with previous elections. Overall, this indicates that other risks, such as the US macroeconomy, earnings seasons, have a greater impact than any perceived election risks."

Analysts stated that in the months leading up to the election, US stocks continued to rise. Typically, investors withdraw from the stock market before the election, making market performance in the month before the election usually negative.

The S&P 500 index fell by 0.3% last month, but in the past six months, it has risen by 10.7%, showing a sustained strong bull market. Analysts stated that the strong performance of US stocks in the weeks leading up to election day may be driven by the strong US economic conditions rather than investors betting on a "Trump trade" or "Harris trade".

"Compared to the past, US stocks have been very strong entering this election cycle," analysts said, "the current unusual situation is not so much related to market pricing of election results, but more to the expectation of continued rate cuts by the Federal Reserve and a possible mild slowdown in the US economy."

The Fed started a loose cycle in September and is expected to continue cutting interest rates by 25 basis points at the upcoming meeting. Meanwhile, economists are increasingly expecting the U.S. economy to experience a 'soft landing', avoiding a sharp recession while inflation continues to slightly decline.

The relatively low volatility index is another sign of limited impact of the US presidential election, indicating that the market may not place too much importance on the election outcome. Analysts say it is rare for the volatility index to be low in an election year.

'Increased uncertainty should translate into higher expectations for volatility. However, with the stock market repeatedly hitting new highs and the VIX index at low levels, this indicates that investors are not very concerned about the election results,' they said.

However, analysts suggest that, as in previous years, the stock market is very likely to rebound after the election. They stated that due to solid performance reported by most companies in the latest earnings season, the current market positions are likely to lead the stock market to rebound after the November 5th vote and potentially climb to new highs in the coming year.

Editor/Jeffy