As the debate between Biden and Trump begins, the impact of the US presidential election on the financial market is gradually emerging. According to the Global Times, the US media summarized the performance of both sides in the first 30 minutes: Biden was incoherent at times, Trump lied about the economy, abortion and defense spending of NATO members, and the two also launched fierce personal attacks on each other. Although the S&P has gone nearly 400 trading days without falling more than 2%, Goldman Sachs recently warned that this situation may soon change. Goldman Sachs analyst Oscar Ostlund believes that the options market usually starts pricing about three months before the election. Although we have not yet fully entered this stage, market volatility is expected to appear soon. As the US election approaches, market volatility is about to rise , and the market should pay close attention to the potential impact of the election on the market. Liu Gang's team at CICC believes that with the first round of presidential election debates being moved forward from September to the end of June, and the approaching monetary policy "window period", election trading may be launched ahead of schedule , and the variables and impacts it brings may gradually increase. In addition, it is worth mentioning that 16 Nobel Prize-winning economists recently issued a joint letter sternly warning that if former President Trump wins the election in November, his economic propositions will reignite accelerated inflation and cause lasting damage to the global economy. Some analysts also pointed out that whether Trump or Biden is elected, higher inflation is inevitable, the only difference is the pace. Goldman Sachs: Election risk begins to spread to financial markets
The 2024 U.S. presidential election ushered in the first televised debate among candidates at around 9 p.m. local time on the 27th (around 9 a.m. Beijing time on the 28th). Biden and Trump took the stage again to face off after nearly four years. Today's televised debate may provide new clues about how markets view the campaign's impact on asset markets. After surveying 800 institutional investors around the world, Goldman Sachs analyzed and summarized three key points: ▲Whether the Republicans or the Democrats are in power, the government will increase the spending freedom of the executive branch, which is undoubtedly a negative factor for the bond market.
▲If Trump wins, whether it is a divided House of Representatives or a unified government, the market believes that it will be good for the stock market because it may mean that the Federal Reserve will adopt a more dovish policy.
▲Investors generally believe that the Democratic Party’s victory will be unfavorable to the US dollar and may lead to a depreciation of the US dollar.
In his election preview report, Goldman Sachs strategist Dominic Wilson detailed the impact that four major election results for the U.S. presidential and congressional elections could have on the market. The four scenarios are a Republican sweep, a Democratic sweep, a split Trump administration, and a split Biden administration. 1. Republican sweep:
In a Republican sweep scenario, Wilson sees a modest rebound in stocks, higher yields and a stronger trade-weighted dollar. Bond yields could rise because a Republican administration would likely extend expiring tax cuts and potentially enact further corporate tax cuts.
2. Democratic sweep:
Wilson sees a modest decline in stocks, a modest depreciation in the dollar and higher yields, with expectations of greater fiscal stimulus from a Democratic administration pushing bond yields higher.
3. Trump administration is divided:
In this scenario, stocks would move modestly lower, yields would move slightly higher, and the dollar would have clear upside. A strong reaction to potential tariffs coupled with fiscal tightening could have a negative impact on stocks and yields.
4. The Biden administration is divided:
The stock market will be lackluster, yields will fall, and the dollar will be weaker. If the new tariffs are less waived than expected, this will add upside to stocks and could push yields higher rather than lower.
Goldman Sachs advises that although the baseline estimate does not provide a strong case for hedging equity exposure, investors should remain vigilant in the face of fiscal expansion and tariff risks. A stronger dollar is seen as a more reliable way to reduce the downside of the stock market, but yields may also be affected in the face of tariff risks. CICC: How the US election affects the economy and the market
After reading Goldman Sachs’ analysis, let’s take a look at CICC’s views. CICC pointed out that compared with the current President Biden, the market is obviously more concerned about Trump's policies , firstly because it may bring changes, and secondly because some of his propositions may be more "extreme". Comparing the policy propositions of Biden and Trump, it is found that there are certain commonalities in the policies on trade and investment spending, while the main differences are concentrated in fiscal, taxation, immigration and industrial policies. From the perspective of economic and policy impact: 1) Most policies that boost the U.S. economy are inflationary , such as trade, investment spending, subsidies, and even immigration policies, which may make it difficult for inflation to continue to fall sharply after the election; 2) Monetary policy space may be suppressed, and the support for both growth and inflation may make it unnecessary for the Federal Reserve to cut interest rates too much; 3) The debt ceiling will take effect in January 2025, which may increase fluctuations in Treasury supply and bond interest rates. From the perspective of market and asset impact: 1) U.S. Treasuries: Expectations of post-election policy stimulus, growth recovery, and rising inflation will bring more upward pressure on U.S. Treasury yields . At the same time, it is necessary to note that the approaching debt ceiling may once again lead to uneven bond issuance. The supply of U.S. Treasury bonds in 2025 may be low at first and high at the end, repeating the situation in October 2023 when the term premium drove the U.S. Treasury yield to a record high. The overall judgment is that the central axis of US Treasury bonds is 4% , and the range before the rate cut is 4.7%-4.2%. Loose trading can still be carried out, but when the rate cut is realized, it may also be when the rate cut trading is nearing its end. 2) US stocks: Overall performance is not bad. The massive tax cuts advocated by Trump and the Republicans will boost corporate profits, but subsidies for high-tech industries may decline, which may be conducive to cyclical sentiment. 
Trump's massive tax cuts in 2018 boosted corporate profits 3) Commodities: Oil prices may be relatively neutral under Trump's policy proposals, and accelerating the issuance of oil and gas exploration licenses may lead to an increase in US oil production. 4) US dollar: There is no basis for the US dollar to weaken significantly in the short term. The tax cuts and infrastructure policies after Trump’s election in 2016 quickly raised growth and inflation expectations, and the US dollar has been trending higher since his election. However, this time Trump proposed a "weak dollar" policy to push the US dollar trend to "boost" US exports, and we need to pay attention to its possible impact. 
