U.S. Elections and Asset Prices: Market Impact and "Trump Trade" Analysis

Overview of the Election

Recently, the first debate for the 2024 US presidential election took place, where Trump performed excellently, while Biden's performance raised concerns about his capabilities. After the debate, Trump's approval ratings significantly increased, giving him an advantage in key swing states.

Important time nodes for future elections include:

1. National Convention of the Two Parties (July and August 2024)
2. Second Round of Candidate Debates (September 10, 2024)
3. Presidential Election Day (November 5, 2024)

Major Policy Differences

Trump and Biden have policy differences in multiple areas:

1. Tax Policy: Trump advocates for lowering corporate income tax, while Biden leans towards increasing tax rates for corporations and the wealthy.

2. Immigration Policy: Trump tends to tighten immigration policies, while Biden is relatively moderate.

3. Industrial Policy: Trump supports the development of traditional energy, while Biden focuses more on clean energy.

4. Trade Policy: Both support high tariff policies, but Trump's position is more radical.

Characteristics of Asset Prices in Election Year

• The overall performance for the year is similar to non-election years.
• Increased asset price volatility in the lead-up to the election (third quarter)
• Stock price performance in October of election years is usually weaker than in non-election years.

Market Review After Trump's Election in 2016

After Trump's victory in 2016, the market experienced a phenomenon known as the "Trump trade":

• U.S. Treasury yields rose and then fell
• The price of gold fell first and then rose.
• The stock market (S&P 500 and Nasdaq) rose
• Bitcoin price rises

Current Market Situation

The "Trump trade" in this round has started early, and the market has begun to position itself after the first debate. The latest events may further increase Trump's voter support, which is expected to have a positive impact on the stock market.

Conclusion

1. The election itself should not be viewed as a bullish reason.
2. Market volatility increases around October in election years, with downside risks.
3. "Trump Trading" main direction:
   • Resistance to inflation and the decline in US Treasury yields
   • Gold prices may come under pressure
   • U.S. stocks may rise, but the extent may be smaller than last time.
   • Bitcoin may follow the trend of the US stock market.