Harris vs. Trump: My Prediction for the US Election
Polls say the US presidential election it is nearly a dead heat and thus a tossup. Then again, given past history, who can believe the polls.
I wish I had a crystal ball. Alas, there is no genie in my bottle. So, there is only one prediction that I can make and that is there will be volatility with a risk it could be extreme depending on the election result.
But there is more…
Let me explain…
While markets will react to who becomes the next president, the makeup of Congress will determine the extent of it.
Here are 8 possible scenario:
Harris wins
- Democrats sweep both Houses of Congress
- Republicans sweep both Houses of Congress
- Democrats win the Senate, lose the House
- Democrats lose the Senate, win the House
Trump Wins
- Democrats sweep both Houses of Congress
- Republicans sweep both Houses of Congress
- Democrats win the Senate, lose the House
- Democrats lose the Senate, win the House
Here is where it gets tricky.
There are 33 senators up for reelection – 20 are Democrats, 10 are Republicans and 3 are independents caucusing with Democrats. With the Senate currently at 51-49 in favor of the Democrats, odds seem better that the Republicans have a better chance to take control of the Senate, especially since Democrat Joe Manchin of West Virginia is retiring. This means the Democrats would need to flip one of the 10 Republican seats just to maintain the status quo and then hold off losing any close races..
This suggests the focus of the election should not only be on who becomes the next president but on the makeup of the House.
Markets love a split government as it prevents extreme policies being enacted. Some call it gridlock. Others call it a divided government. Whatever it is called, it means which party controls the House of Representatives will be a factor influencing the extent of the reaction to the elections.
With that said, a Trump win would see a greater reaction but then again the extent of which would be determined by who controls the House. See Is the Trump Trade Back On?
Getting back to my prediction. Even if I revealed who I think will win the presidency, I would also have to predict which party will control the House of Representatives. So, rather than make a meaningless forecast, I prefer to highlight what else to look for when gauging how to view the reactions to the election results.
As for trading, a concern should be that a clean sweep by one party would lead to even higher deficits from increased spending and/or tax cuts. So, watch the bond market’ reaction to the election results.
Harris vs. Trump: My Prediction for the US Election
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