The presidential election in the United States. How will it affect financial markets?

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The presidential race in the United States has entered the final stretch.

Yesterday’s debate between Joe Biden and Donald Trump did not reveal an apparent winner and the United States’ future president. Financial markets reacted with a slight strengthening of the US dollar and a fall in futures for American and European stock indices.

However, at the trade opening, the European market tried to recover, apparently believing that whoever wins the elections would not radically change the market situation.

Investors ask themselves what will happen after the 4th of November, when the election results will be announced.

It is difficult to predict the development of the events. Still, I will try to figure out the various factors that may influence the financial markets’ situation after this date.

What could be the consequences?

I believe that the Fed’s monetary policy and the US Treasury’s fiscal policy will not change radically. All the stimulus measures were taken earlier aimed at supporting the economy and the Americans will remain.

It is possible that the trade conflict between Washington and Beijing will subside but will not fade away entirely since the United States needs to change the balance of trade with China and many other countries. Likely, a COVID-19 vaccine will be developed by November, which will be the most substantial reason for positive sentiment growth in the markets. In this case, we can expect steady growth in demand for company shares, a weakening of the dollar, and, as a consequence, an increase in stock indices around the world.

Unfortunately, the post-election intensification of political confrontation between Trump and Biden supporters, who may not recognize the uncomfortable election result, may lead to the stagnation in the stock market or even its decline against the background of other negative factors.

What might be expected soon?

I believe that the market will be subject to high volatility until the 4th of November. It will likely be in a sideways trend awaiting the outcome of the American elections.


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