Quick Thoughts: US elections—entering the final stretch

As the November 2024 US election approaches, current indicators suggest a likely divided government, which, while common historically, could pose increased risks regarding US sovereign default if the debt ceiling is not raised. Recent dynamics have shown tightening races following Vice President Kamala Harris's entry into the presidential race, with potential impacts on sector-specific outcomes, particularly in energy and pharmaceuticals.

Despite these political shifts, broader market returns are expected to primarily depend on fundamentals rather than election results. A divided government typically reduces the likelihood of drastic legislative changes, offering some stability for investors, but raises concerns about the potential for political standoffs that could lead to default risk.

For equities, regulatory actions will be a critical focus, as changes in administration may drive different approaches to corporate taxation and industry regulation. Currency values will likely adjust to shifts in interest rates and economic performance, with the US dollar facing downward pressure due to slowing growth, though risks remain if trade tensions escalate.

Finally, ongoing scrutiny of anti-trust regulations in the tech sector will be influenced by the election outcome, reflecting broader public sentiment on corporate power.