Citizens of the United States are called to the polls this Tuesday to choose the country’s next president. The result, which will give Kamala Harris victory or Donald Trumpas could be expected, will mark the beginning of a new stage which will have its consequences on the American stock market, but also on the rest of the financial markets due to the influence of Wall Street beyond the United States. Thus, stocks conclude Joe Biden’s bullish period, by more than 50% over these four years, which leads the S&P 500 index to record new all-time highs at 5,864.7 points and trading at a 26% premium on its average millennium profit multiplier.
The inheritance you will receive the 47th president of the United States of America he will bring a bag with him an increase of 2.7% from its all-time highs and an S&P 500 with a P/E (times net income included in the stock price of the group of companies in the index) of 24.2 times. That is to say, its price is expensive compared to the average multiplier of this selective so far this century, which amounts to 19.2 times. Also since then, this indicator has been recorded, according to Bloomberg, which has been collecting data since 1991, with a PER of 19 times.
With no clear winner after November 5, while the latest polls leave Harris and Trump technically tied at the gates of the opening elections, the policies of Joe Biden’s successor will determine the future of the American 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 elections, the uncertainty over the outcome is enormous. The range of outcomes in terms of fiscal and trade policy therefore remains wide,” explains Thomas Hempell, market analyst at Generali AM.
However, Biden’s presidency does not represent a historic end for Wall Street’s main index. The S&P 500 has increased by 11.5% at an annualized rate since the Democrat came to power (49.1% in four years) but this would be the second worst period for this selection among the last eleven legislatures and seven different presidents. In fact, the big American stock market benchmark has only made things worse. with the eight years of George W. Bush, when the S&P 500 fell 34%while it was under the presidency of Bill Clinton that Wall Street had its best streak, which involved an increase of more than 200%. During the Clinton era, between 1993 and 2021, there was also a period of surplus (GDP relative to public debt) for three consecutive years (1998-2000).
However, American policy is not the only element to leave its mark on the markets. For example, the stock market crash caused by the Lehman Brothers crisis occurred in the latter stages of George W. Bush’s term, while Donald Trump’s presidency was marked by the fall due to the pandemic, but also by most rally stock market after recovery.
Joe Biden’s presidency has been marked by the implementation of fiscal stimulus measures focused on keeping the US economy afloat after the effects of the coronavirus pandemic. This, combined with a low interest rate environment and the purchase of sovereign debt by the US Federal Reserve, has resulted in a more favorable environment for stocks. 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 has soared and the country’s job market has shown its strength for the same incentives that enabled the post-Covid recovery. And global geopolitical tensions have also led to market volatility during the final stage of his term.
However, the market consensus reported by Bloomberg expects that the S&P 500 closes 2024 with a PER of 24 timessimilar to that observed at current prices and earnings per share of $238.2: the highest of the Biden stage and 9.7% above what was observed in 2023. Likewise, already waiting for this which will happen with the name of the winner, the analytical firms predict a potential of 11.7% at 5,730 target price levels.
The current market volatility is another aspect that will accompany the next leader at the helm of the White House. Likewise, the 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 in the event of a Trump victory: remove monetary restrictions more quickly,” commented Gilles Moëc, chief economist at Axa IM.
A priori, we assume that a Democratic victory (not only for the presidency but also with a majority in Congress) would benefit the most. sectors such as renewable energyhealthcare companies or consumer discretionary companies in the US stock market. On the other hand, a Republican victory would be more favorable to sectors like telecommunications, energy or finance if Donald Trump keeps his campaign promises.
Wall Street during the election campaign
The last six months, during 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 has seen sharp upward and downward adjustments due to political events, macroeconomic data, geopolitics and the incipient decline in interest rates. And yet, the last half-year translates into the third most favorable for the Wall Street stock market during an electoral period, behind the elections won by Joe Biden (November 3, 2020) and those of Ronald Reagan in 1980. In both cases, the increases were greater than 20%.
A priori, experts have always considered that a tie between the two candidates was one of the scenarios that would add greater volatility to the financial markets. This was true when Biden withdrew in favor of Kamala Harris, when polls gave a greater probability of a Democratic victory, but also when Trump has made up the difference until today. Likewise, the six months following the elections lead to increases in 80% of cases in the last eleven elections.
