The 2024 U.S. presidential elections carry significant implications for both the global economy and financial markets. While the U.S.A. economy is growing, and stock indices like the S&P 500 remain strong, political uncertainty is casting a shadow. Here’s a closer look at the key factors and numbers behind this electoral cycle.
Economic and Market Volatility
Historically, election years in the U.S. tend to see increased volatility in the stock market. For instance, during previous election cycles since 1984, stock performance has generally been lower, with volatility peaking just before election results are confirmed. The current VIX, a key index for measuring market volatility, is still in its lower quartile, but it’s expected to rise as we approach the November election.
Key Issues for Investors
Donald Trump’s proposal to extend tax cuts from 2017 could increase the U.S. deficit by $3.3 trillion over the next decade, raising the debt-to-GDP ratio to 125% by 2033. Alternatively, imposing a 10% tariff on all imports, as Trump suggests, could generate $2.5 trillion in revenue, but would risk igniting a global trade war. Harris-Biden’s camp, on the other hand, focuses on environmental goals, aiming for carbon neutrality by 2050.
Impact on Global Trade
The elections also affect global markets, particularly in emerging economies. If Trump wins, the U.S. dollar is expected to strengthen due to heightened trade tensions, potentially increasing tariffs by 10% on imports. Countries like Vietnam, which have benefited from trade relations with both the U.S. and China, could see economic repercussions.
The Big Numbers
- Debt to GDP: Could hit 125% by 2033 under Trump’s extended tax cuts
- Tariff Revenue: A 10% tariff on imports may raise $2.5 trillion but could trigger global trade conflicts
- VIX Volatility Index: Currently low, but likely to increase sharply nearing November 2024.
As election day approaches, market uncertainties may drive volatility, and global economic repercussions will depend heavily on who takes the presidency. Investors appear to brace for potential shifts in trade policies and fiscal strategies.
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