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By aquant Blog November 4, 2024

4/11/2024  

Markets at a crossroad ahead of the US elections ! What’s next ?

The S&P 500 has experienced a consistent downward trend, marked by lower lows, lower highs, and lower closes for two weeks, with October closing at 5705, below its opening of 5757. This bearish trend is compounded by a lack of compelling reversal patterns and the structure of the decline appearing correctional rather than indicative of a trend shift. Key support levels are established at 5669-74, with a potential further drop to 5400 if these levels are breached.

Market sentiment has been impacted by uncertainties surrounding the upcoming presidential election. Polls indicate a tighter race between Kamala Harris and Donald Trump, with recent surveys suggesting a slight edge for Harris. This shift in perception has led to a decline in the dollar and a rally in US Treasuries, with the ten-year yield going to 4.28%.

Despite the uncertain electoral landscape, the corporate taxation policies under a potential Harris administration could result in a 5% decline in S&P 500 earnings, whereas Trump’s policies might yield a 4% increase. However, the overall impact on the market’s fundamental value is expected to be minimal. Additionally, significant geopolitical events, particularly tensions involving Iran and Israel, could heavily influence market dynamics in the near term.

Central bank actions will also shape market activity, with the Federal Reserve anticipated to cut rates by 25 basis points this week. Oil prices have surged nearly 3% due to OPEC+ delaying a production increase and heightened tensions involving Iran. Overall, financial markets are entering a period of volatility as they respond to both electoral outcomes and macroeconomic signals, with a focus on potential changes in fiscal policy and geopolitical developments.

We believe that a sweep victory for Republicans & Trump will release animal spirits in the markets & a blue sweep victory with Kamala Haris as president will send markets to a medium correction at least for the first days. In any case prudent investor either hedge or unload heavy positions prior to elections. There will be always opportunities to go in to the markets !

IMPORTANT DISCLAIMER

The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.

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