Recent polls indicate the competition continues to be rather close between Donald Trump and Kamala Harris as both head into the final week of their presidential campaigns.
But it looks like the Wall Street has already decided who will win the Office in November.
“Investor community, they’ve been very, very favouring Trump based on my conversations and based on just a general ambiance,” as per Jose Torres – a senior economist at Interactive Brokers.
The benchmark S&P 500 index is keeping super strong ahead of the elections, now up close to 25% versus the start of 2024.
Trump’s victory could be a bane for European stocks
Ongoing weakness is European stocks is among the telltale sign that investors anticipate Donald Trump to land in the White House in November.
That’s because the former President of the United States is broadly expected to announce new tariffs on imports, which could mean a significant earnings hit for the European companies.
EU equities are, therefore, lagging as they are being perceived as “the losers from a second Trump presidency,” according to Emmanuel Cau, the European equities strategist at Barclays.
A transatlantic trade war following Trump’s victory could lower EPS growth by as much as 9.0% in the worst-case scenario, he added.
Barclays particularly expects the European tech and auto market to take a hit if Donald Trump is reelected as the President of the United States in November.
Inflation could inch up under a Republican government
Another indication that the Wall Street is already pricing in a Trump victory is the inflation market. Economic policies of the Republican candidate are broadly expected to result in higher levels of inflation heading into 2025.
“Expected tariffs (per Trump’s stated proposals) support potential upside risk to market pricing of inflation if Trump wins the US election,” Bank of America strategist Meghan Swiber told investors in a recent note.
Inflation was up 0.2% for the month and 2.4% on a year-over-year basis in September.
Both readings surpassed Dow Jones consensus by 0.1 percentage points, as per the Bureau of Labour Statistics.
Forecasts for future consumer price index (CPI) readings have also inched up in recent weeks.
Inflation compensation, for instance, has climbed up over the past month, reiterating that the Street expects Donald Trump to beat Kamala Harris in US elections 2024, the BofA strategist argued in her research note.
She expects Trump’s tariffs to push inflation up by as much as 70 to 80 basis points in the coming months.
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