Buyers are scrambling to shift their positioning following the closely-watched debate between US Republican Donald Trump and Democratic Vice President Kamala Harris, as betting markets swung in Harris’s favour after the occasion.
Shares of Trump Media & Know-how Group, the corporate that owns Fact Social, fell 13 p.c on Wednesday afternoon, whereas different so-called Trump trades similar to Bitcoin and crypto shares retreated. Photo voltaic shares, seen as benefitting from a Harris win, rallied and healthcare shares fell.
In a combative debate late Tuesday, Trump and Harris clashed over every part from the financial system to immigration, as every sought a campaign-altering second in what has been a closely-fought race.
Their exchanges left buyers with few new particulars on United States points that might sway markets, together with tariffs, taxes and regulation. However on-line prediction markets confirmed bets on a stronger chance of a Harris win in November: Harris’s odds in PredictIt’s 2024 presidential normal election market improved to 55 cents from 53 cents earlier than the controversy, whereas Trump’s odds slipped from 52 cents to 47 cents.
There’s a “normal view that Harris won the debate,” stated Alvin Tan, head of Asia FX technique at RBC Capital Markets in Singapore. “It’s clearly not a slam dunk for Harris, however the probabilities of a Trump victory have slipped a bit.
Whereas the presidential race could be very a lot on buyers’ minds, political considerations have recently coalesced with extra fast market catalysts, together with worries over a probably softening US financial system and uncertainty over how deeply the US Federal Reserve might want to reduce rates of interest.
The S&P 500 notched its worst weekly proportion loss since March 2023 final week after a second-straight underwhelming jobs report, although the index remains to be up round 15 p.c this yr.
Nonetheless, some buyers imagine even a small shift in perceptions of the candidates may show vital in a contest that might come right down to tens of 1000’s of votes in a handful of states. The candidates are successfully tied within the seven battleground states more likely to determine the election, in line with polling averages compiled by the New York Occasions.
“The US presidential debate achieved its objective by offering a decisive edge to one of many candidates in what has been an exceptionally shut race,” stated Charu Chanana, head of FX Technique and international market strategist at Saxo. “Crypto and power shares may face headwinds as market sentiment adjusts to the shifting political dynamics.”
Trump has positioned himself as a pro-cryptocurrency candidate.
Debate influence
Buyers pointed to a number of corners of the market the place the controversy appeared to have made an influence.
Buyers hammered the shares of Trump Media & Know-how Group, which have been well-liked amongst retail merchants and delicate to the previous president’s probabilities of a win within the 2024 election. The inventory fell by as a lot as 18 p.c to a brand new post-IPO low of $15.30. Bitcoin was about flat on the day after slipping practically 4 p.c, whereas shares of some cryptocurrency-focused corporations together with crypto miner Riot Platforms additionally fell.
Inventory of operators of correctional services, together with GEO Group and CoreCivic, seen as more likely to profit from more durable immigration insurance policies, additionally slipped.
On the identical time, US-listed shares of photo voltaic corporations, seen as benefitting from a Harris win, rose. The Invesco Photo voltaic ETF, down about 25 p.c for the yr, jumped 5 p.c on Wednesday.
Well being insurer shares together with Humana and CVS Well being have been additionally down on Wednesday. Some analysts imagine Harris’s push to decrease drug costs could weigh on the sector.
Taxes and tariffs
Trump has promised decrease company taxes and a more durable stance on commerce and tariffs. He has additionally stated a robust greenback hurts the US, although some analysts imagine his insurance policies may spur inflation and ultimately buoy the foreign money.
Harris last month outlined plans to lift the company tax charge to twenty-eight p.c from 21 p.c, a proposal that some on Wall Avenue imagine may harm company earnings.
Steve Chiavarone, senior portfolio supervisor at Federated Hermes, stated a Harris presidency, seen as much less more likely to widen price range deficits by increased spending, may assist help Treasury costs whereas additionally boosting large-cap development and tech shares.
US-focused insurance policies similar to tax cuts and tariffs in a Trump presidency may buoy small-cap shares and cyclical corporations whereas hurting bonds, he stated.
On Tuesday night time, Harris attacked Trump’s intention to impose excessive tariffs on international items – a proposal she has likened to a gross sales tax on the center class – whereas touting her plan to supply tax advantages to households and small companies.