Digest: Monday’s Pre‑Election Shuffle
It started like a clumsy dance – the final set of pre‑election positions got slapped, and now the market’s eye is glued to the main event.
Where We Stand
I’ll keep it snappy because the long pre‑election preview follows. Markets were mostly quiet on Monday: stocks were floating, the dollar shed a little ground, and everyone kept their gaze locked on the presidential battle.
A quick clean‑up happened before the big day: some of the fresh “Trump‑trade” bets unwound, thanks to polls tightening up and odds narrowing. Trade‑hunters also popped profits just before the showdown. The Treasury market felt the shift hardest – yields on 7‑‑30‑year bonds slid over ten basis points, wiping out Friday’s late‑day sell‑off.
With such a messy pre‑election session, there’s not much to dig for. So let’s jump into the big weekend ahead.
Look Ahead – What the Next 24–48 Hours Might Look Like
Election Day is finally here – this is what the next day could unfold like.
I and the Pepperstone research crew will be on standby all night. Drop us a line whenever you need help.
The Backdrop
- Uncertainty around the election has nudged most market players into neutral positions over the past couple of weeks, helping explain the recent declines in the S&P 500 and other squaring.
- Conviction has been thin – not many traders are willing to risk their Year‑to‑Date P&L when the race is so finely balanced. Risk‑management is king now, and it should stay that way.
- Nationwide opinion polling, averaged on RealClearPolitics, puts Trump and Harris almost neck‑and‑neck at 48.5 % vs. 48.4 %, well within the margin of error.
- The Electoral College means the swing states hold the key: Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin. Polls there are also tight.
- Betting odds tip a slight edge to Trump (Polymarket 59 % vs. 41 %; Kalshi 57 % vs. 43 %). Regardless of the metric, the race is too close to call confidently.
Election Night
Polling starts winding up at 7 pm ET (midnight Wednesday in London). News outlets and TV networks begin to “call” each state. Markets will focus most on those swing states.
- In the early hour, the final result’s timing will matter more than the winner. The longer it drags, the more uncertainty creeps in and risk appetite wanes.
- In 2016 the outcome was called around 2:30 am ET (7:30 am GMT). In 2020 it was not called until the Saturday after.
- Some state details:
- Arizona – polls close at 9 pm ET (2 am GMT); counting starts an hour later.
- Georgia – polls close at 7 pm ET; counting starts right away with mail‑ins.
- Michigan – polls close at 9 pm ET; counting wraps up by noon ET.
- Nevada – polls close at 10 pm ET; counting starts at close.
- North Carolina – polls close at 7:30 pm ET; counting already underway.
- Pennsylvania – polls close at 8 pm ET; no ballots counted until election day.
- Wisconsin – polls close at 9 pm ET; counting ends noon ET.
Market Impact: Who Wins?
Trump Wins:
- Markets lean toward reflation – tax cuts could boost growth, tariffs might stir inflation.
- Expected moves:
- USD climbs, especially against trade‑sensitive currencies (MXN, CNH, EUR).
- Long‑end Treasury yields drop.
- Equities climb, particularly Energy and Defence.
Harris Wins:
- Say “continuity.”
- Expected moves:
- USD weakens as Trump‑linked hedges unwind.
- Treasuries dip, but less sharply.
- Equities dip first, but clear a quick rebound; Clean Energy and Tech could shine.
Congress also matters. With all 435 House seats and 34 Senate seats up for grabs, expectations point to Democrats flipping the House and Republicans flipping the Senate.
My ranking of likely electoral outcomes (most to least likely):
- Trump Presidency, Divided Congress – “Divided Red Government”
- Harris Presidency, Divided Congress – “Divided Blue Government”
- Trump Presidency, GOP Congress – “Red Wave”
- Harris Presidency, Democrat Congress – “Blue Wave”
In any “Divided Congress” outcome, Treasury downside is capped because a split Congress limits deep fiscal loosening possibilities.
Those are the short‑term waves the market is pricing into the overnight implied volatility. Stay tuned for the next chapter of the story.
Get Your Head Around Market Moves After the Election
Hold tight, folks—here’s the low‑down on how you can stay ahead of the curve when the political circus ends and the financial stage takes center stage again.
1. Picture the Big Picture
- Think of the U.S. election as a roller coaster: the peak is the vote tally, the dip is the aftermath. Zoom out and you’ll see the entire loop.
- Instead of hunting for the minute‑by‑minute swings, grab the 1‑week volatility—that’s the market’s “how nervous” gauge over a full week.
2. Use Volatility as Your Compass
- 1‑week vols are like a weather forecast—what’s the chance of a storm? If it’s high, stay cautious.
- These numbers can hint at future moves after the election dust settles.
3. Don’t Forget Thursday’s FOMC Decision
Remember, the Federal Open Market Committee’s decision on Thursday is part of that same volatility picture. Whether they raise, lower, or hold rates will color how the markets groove in the weeks that follow.
Bottom Line
Keep your eyes on the week‑long volatility trend and the FOMC’s words. That’s your two‑step dance for navigating the post‑election market beat.
Do Election Results Really Shift the Big Picture?
Hold on, let’s take a breath and ask the real question: does a new president really rewrite the long‑term macro or market outlook? I’m leaning hard toward a solid “no.”
The Three Pillars That Keep the Bull Running
- Solid earnings growth – Companies are still making money, and that’s the bread and butter for investors.
- Strong economic growth – GDP and consumer confidence keep ticking, no matter who picks up the keys.
- The “Fed put” – Central bank policy keeps the market grounded, offering a safety net that’s independent of the White House’s newly minted vibe.
In short, while politics can make headlines & stir some short‑term noise, the fundamentals that drive our market story stay pretty much the same. Investors can keep their eyes on those pillars, not the ballot box.
