Markets Prepare for Uncertainty as US Election Approaches

07:52 5/11/2024 - Πηγή: iEfimerida

Global markets are bracing for heightened volatility as the closely contested US presidential election between Donald Trump and Kamala Harris approaches.

The uncertainty surrounding the election outcome has led investors to shift toward safer assets and adopt strategies to protect against potential risks, contributing to market

instability this month.

Analysts warn that while investors may look for clues in either a "Trump Trade" or "Harris Trade," neither candidate offers a guaranteed safe bet for markets.

"The biggest safety net for investors is simply the certainty of the result," explained Michael Brown, senior strategic analyst at Pepperstone London. "Markets crave clarity, and a definitive outcome would let those who have hedged against election risks unwind their positions and reinvest."

Stock markets are expected to be particularly volatile around the November 5 election day, with potential reactions comparable to the upheaval seen during events like Brexit and the 2016 US election. The CBOE Volatility Index, a common measure of market risk, surged 35% in October, reflecting investor caution and higher risk premiums.

Major stock indices worldwide, such as the S&P 500, Euro Stoxx 600, and ASX 200, have each dropped by 2% to 3% in recent weeks as a result of pre-election uncertainty.

Mr. Brown noted that markets could see similar fluctuations in the coming days, with expectations of volatility ranging from 2% to 3%. This level of movement could allow stock markets to recover by next week if the election outcome is clear and recounts or delays are avoided.

While a Trump presidency could bring challenges for some sectors, especially if tariffs and trade restrictions return, analysts agree that a decisive election result could restore stability across global markets.

By Vassilis Kaltsas

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