With Election Day here, the U.S. market is bracing for significant shifts, as the contest between Donald Trump and Kamala Harris has investors speculating about the future of key sectors. Analysts say that a contested election could create immediate instability for U.S. equities, with prolonged uncertainty potentially disrupting market movements.
According to Lori Calvasina of RBC Capital Markets, a contested election or an unexpected Democratic sweep poses the biggest risks for equities. “A close, contested election is the main tail risk we see for U.S. equities in the days and months ahead,” Calvasina noted, underscoring the potential volatility.
Trump Trade vs. Harris Trade
A Trump victory has driven recent rallies in financials and cryptocurrencies, with investors anticipating favorable policies toward these sectors. Bitcoin, for instance, surged to $71,000 before dipping below $67,000 following polling that showed Harris ahead in key states. Financials also experienced a reversal on Monday after leading sector performance in October. These moves highlight investor expectations that Trump’s policies could boost banks and crypto assets.
On the other hand, a Harris win could benefit consumer goods, which have been pressured by the uncertainty around Trump’s tariffs. Morgan Stanley’s Mike Wilson predicts a rise in tariff-exposed consumer equities and renewable energy stocks if Harris prevails. However, he adds that a split Congress might temper the longevity of these gains.
“In our view, market leadership in divided Congress outcomes will likely come down to the business cycle, the Fed’s reaction function, and industry-specific fundamentals following the election,” Wilson wrote, suggesting a complex interplay of factors depending on the election results.
Interest Rates and Treasury Yields
Market experts also note that Trump’s policies are viewed as more inflationary, leading to higher interest rates and a rise in the 10-year Treasury yield. The yield has climbed roughly 70 basis points over the past six weeks, partially driven by the possibility of a Trump win. Yet, should the economy continue its growth trajectory, some analysts believe the equity markets may adjust to these higher rates.
Citi’s Scott Chronert points out that homebuilders, sensitive to rising rates, would likely see relief under a Harris administration. “Higher rates are a perceived relative negative for homebuilders,” said Chronert, “but Harris’s policies could directly support first-time homebuyers, which may positively impact companies in the sector.”
Trump Media & Technology Group (DJT) in Focus
Trump Media & Technology Group (DJT) stock has drawn attention as a speculative play closely tied to the election outcome. Shares of DJT have surged over the past month, although polling that points to a close race has injected volatility. If Trump loses, analysts warn that DJT’s stock could take a severe hit, potentially costing Trump billions.
As the election results unfold, investors and market strategists alike are bracing for immediate impacts across sectors, with Trump and Harris each casting a different shadow over future economic policy.
