The citizens of the United States are called to the polls this Tuesday to choose the next president of the country. The result, which will give victory for Kamala Harris or Donald Trumppredictably, will mark the beginning of a new stage that will have its consequences for the US stock market, but also for the rest of the financial markets due to the influence of Wall Street beyond the United States. Thus, equities conclude Joe Biden’s bullish period, more than 50% in these four years, which leads the S&P 500 index to register new historical highs at 5,864.7 points and trading at a premium of 26% on its millennium average profit multiplier.
The inheritance you will receive the 47th president of the United States of America he will bring a bag with him a 2.7% rise from its historical highs and an S&P 500 with a PER (times that the net profit is included in the trading price of the group of companies in the index) at 24.2 times. That is to say, it is priced expensively compared to the average multiplier of this selective so far this century, which stands at 19.2 times. Also since there has been a record of this indicator, according to Bloomberg, which has collected data since 1991, with a PER of 19 times.
Without a clear winner after November 5, since the latest polls leave Harris and Trump in a technical tie at the gates of the opening of the polls, the policies of Joe Biden’s successor will determine the future of the US stock market due to their disparate nature. what are the Republican and Democratic proposals that favor different assets. “With just a few hours before the election, the uncertainty about the result is enormous. Therefore, the range of results in terms of fiscal and trade policy remains wide,” explains Thomas Hempell, market analyst at Generali AM.
However, Biden’s presidency does not represent a historic term for the main Wall Street index. The S&P 500 has advanced 11.5% annualized since the Democrat took office (49.1% in four years) but it would be the second worst period for this selective of the last eleven legislatures and seven different presidents. In fact, the big US stock market benchmark only made it worse with the eight years of George W. Bush, when the S&P 500 fell 34%while it was with the presidency of Bill Clinton when Wall Street chained its best streak, which involved rising more than 200%. During the Clinton era, between 1993 and 2021, there was also a period of surplus (GDP versus public debt) for three consecutive years (1998-2000).
However, US politics is not the only element leaving its mark on the markets. As an example, the stock market crash caused by the Lehman Brothers crisis occurred in the last steps of George W. Bush’s term, while Donald Trump’s presidency was home to the fall due to the pandemic, but also most of the rally post recovery stock market.
Joe Biden’s presidency was marked by the implementation of fiscal stimuli focused on keeping the US economy afloat after the effect of the coronavirus pandemic. This, together with a low interest rate environment and the purchase of sovereign debt by the United States Federal Reserve, translated into a more favorable environment for equities. However, challenges have also been present since Biden took office before the American people on January 20, 2021 (US presidents are sworn in on this date). The Inflation skyrocketed and the country’s labor market showed its strength for the same incentives that allowed recovery after Covid. And global geopolitical tension also brought volatility to the markets in the final stage of his mandate.
However, the market consensus reported by Bloomberg expects that the S&P 500 closes 2024 with a PER at 24 timessimilar to that seen at current prices and a profit per share of $238.2: the highest of the Biden stage and 9.7% above what was seen in 2023. Likewise, already waiting for what will happen with the name winner, analysis firms predict a potential of 11.7% to 5,730 target price points.
The current volatility of the market is another aspect that will accompany the next leader at the head of the White House. Likewise, the US Federal Reserve will also speak this weekperhaps even before having the final result of the presidential elections this Tuesday. On the other hand, a Republican victory would also have consequences for the European monetary policy. “All factors lead to the same policy recommendation for Europe if Trump wins: remove monetary restrictions faster,” commented Axa IM chief economist Gilles Moëc.
A priori, it is assumed that a Democratic victory (not only for the presidency but also with a majority in Congress) would benefit the most. sectors such as renewable energyhealth companies or consumer discretionary companies on the US stock market. On the other hand, a Republican victory would be more favorable for sectors such as telecommunications, energy or finance if Donald Trump fulfills his campaign promises.
Wall Street during the election campaign
The last six months, in which the electoral campaign in the United States was at its peak, the S&P 500 is up 10.6%. Six months in which Wall Street found sudden upward and downward adjustments due to political events, macroeconomic data, geopolitics and the incipient interest rate cut. And yet, the last semester translates as the third most favorable for the Wall Street stock market during the electoral period, only behind the elections won by Joe Biden (on November 3, 2020) and those of Ronald Reagan in 1980. In both cases, the increases were greater than 20%.
A priori, experts considered at all times that a tie between both candidates was one of the scenarios that would add greater volatility to the financial markets. This held true when Biden withdrew in favor of Kamala Harris, when polls gave a greater probability of a Democratic victory, but also when Trump closed the difference until today. Similarly, the six months after the elections bring increases in 80% of the cases in the last eleven elections.
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