US Election Outcome with a Focus on FOMC

1.   Introduction

US elections usually bring a wave of anticipation and volatility to financial markets, with investors closely scrutinising candidates’ policies that could shape the economy for upcoming years. In the 2024 election, key sectors like tax policy, healthcare, trade, and economic stimulus are at the forefront of market attention. Each area holds the potential to move markets significantly, from equities and bonds to commodities and currencies. Understanding these dynamics is crucial for navigating market opportunities during this pivotal period.

2.   Policies examined and how they impact

a) Tax Policies

Tax policy was a focal point of Donald Trump’s administration, significantly benefiting Nasdaq-listed tech companies. His 2017 Tax Cuts and Jobs Act reduced corporate tax rates from 35% to 21%, boosting profit margins for tech giants and fueling growth-focused reinvestments. This policy supported innovation and stock buybacks, which drove the Nasdaq to record highs. Tech-heavy companies, sensitive to taxation levels, thrived under this low-tax environment, reinforcing the sector’s dominance and investor confidence during his tenure.

After Trump had been re-elected indices went to the upside. Despite the stronger Dollar markets geared up momentum again. The Nasdaq was also able to defend the psychological 20.000 level with potential upside to continue for now.

b) Healthcare Policies

Healthcare policy is a critical driver for the Dow Jones Industrial Average, which includes key players like UnitedHealth Group, whose CEO has just been killed by an assassin. Major reforms, such as the Affordable Care Act (ACA) in 2010, caused significant volatility, as investors assessed its impact on insurance and pharmaceutical profits. Similarly, Donald Trump’s 2016 campaign to repeal the ACA introduced uncertainty, affecting healthcare-heavy Dow components.

The Dow Jones Index has not only surpassed its all-time high but also climbed nearly 7% since Donald Trump’s election. Optimism surrounding the economy, particularly expectations of increased spending on insurers and hospitals, could further support the market to new heights. Any technical retracement could provide opportunities for entry into long positions.

c) Trade Policies

Trade policy has significantly impacted oil markets, especially during Donald Trump’s presidency starting in 2016. His tariffs on Chinese goods and anti-globalisation stance heightened fears of a trade war, reducing global growth expectations and pressuring oil demand. On the other hand, Trump’s “America First” energy policies, including deregulation and boosting domestic production, increased US oil output but created oversupply concerns.

Currently, technical patterns in the oil market might offer a further decline. As the monthly chart above shows, downside momentum might occur. A break of the USD 67.00 zone might indicate a further slide in prices. Only a break of the 50- moving average above could indicate this market to stabilise.

d)  Economic Stimulus Packages

Economic stimulus during Donald Trump’s presidency played a significant role in gold price movements. In 2020, pandemic-driven relief packages supported by the Trump administration increased government spending, raising concerns about inflation and fiscal deficits. These factors often weaken the Dollar, enhancing Gold’s appeal as a safe-haven asset. Additionally, Trump’s pro-growth fiscal policies created mixed sentiment; while they fuelled economic optimism, the increased uncertainty from political and economic debates kept Gold in demand as a hedge against volatility during the election year.

The Gold price is current declining after having tested the USD 2,785.00 level. Only a break of the recent all-time-high might indicate further potential. Since the Dollar had started to weaken slightly this might be the case in the coming months ahead. Then, a test of the USD 3,000.00 zone might happen.

3.   Conclusion and potential moves during upcoming FOMC meeting

As the inauguration of Donald Trump is near, financial markets will potentially face some volatility in the coming weeks ahead. Traders should hence focus on affected economic policies and focus on aforementioned sectors. Gold remains a hedge against fiscal uncertainty and potential inflation deriving from stimulus discussions, while EURUSD will likely be influenced by both election-driven volatility and the upcoming FOMC meeting.

The EURUSD currency pair is currently trading right on top of the key technical support zone at 1.0500. The Federal Reserve’s stance on interest rates could influence sentiment, with hawkish signals likely supporting the Dollar and dovish signals providing support for the Euro. Another rate cut in December may follow, so traders should brace for increased volatility in the coming weeks.