Barclays, a long-established British bank, recently stated that, less than two weeks before the US presidential election, European stock markets have already priced in a victory for former US President and Republican presidential candidate Trump.

The bank stated that since early spring, the stock prices of a basket of European exporters - those most affected by tariffs - have underperformed the benchmark Stoxx Europe 600 index by 15%.

Barclays stated that this reflects investors preparing in advance for Trump's proposed tariff policy in anticipation of his victory in the election. Tariffs have always been a cornerstone of Trump's presidential campaign platform.

"Concerns over tariffs have weighed on the relative performance of European stock markets so far this year." Barclays analysts led by Emmanuel Cau wrote in a report on Wednesday. "If a full-blown trade war erupts, we could see earnings per share growth dragged down by high single digits, with the highest risks faced by Germany, Italy, capital goods, autos, beverages, technology, and chemicals."

However, Barclays also pointed out that since 2018, some European companies have shifted production to the U.S., which could to some extent limit the impact of its trade policy on the entire European market if Trump is elected. But the bank still worries about the side effects of this scenario.

Barclays wrote: "The secondary impact of low growth and high inflation (i.e., stagflation) could be more severe, especially in the case of retaliation and trade wars."

Barclays' report also suggested that a victory by U.S. Vice President and Democratic presidential candidate Harris would lead to a rebound in European markets. Her policies would also boost the clean energy and renewable energy sectors in the European market, which have underperformed in anticipation of a Trump victory.

The US stock market will also be affected. Barclays predicts that Trump's tariff policy will have an impact on $S&P 500 Index (.SPX.US)$a drag of 3.2% on next year's EPS, with the most significant negative impacts on raw materials, non-essential goods, industrial, technology, and medical care. In addition, retaliatory measures will also result in an additional 1.5% hit to future EPS.

As the US election enters its final sprint, the intense competition between Trump and Harris is escalating. Traditional polls show that Harris and Trump's support nationwide and in battleground states are fluctuating, leading to an unpredictable situation.

However, major gambling platforms such as Polymarket show that Trump has a better chance of winning, which has sparked a resurgence of 'Trump trades' in recent days. Some, including one of Trump's biggest supporters, Musk, believe that in predicting election results, betting odds are more accurate than polls.

Editor/Rocky