"No Trade"… Wall Street Also Stops Betting on the 'Neck-and-Neck' US Presidential Election

[US Election 2024]
Presidential Election Voting on the 5th... Battleground States in a Neck-and-Neck Race Deciding the Outcome
Unpredictable US Election Has Wall Street Holding Its Breath
Trump Divides Media, Tesla, Bitcoin, and More
US Treasury Yields and Dollar Down... Anti-Trump Trades

‘There was neither a Harris trade nor a Trump trade.’

As the 47th U.S. presidential election, expected to be a razor-thin contest, kicked off, Wall Street held its breath, refraining from betting on any particular candidate while closely watching the election results. An unprecedentedly tight race unfolded in the seven key battleground states holding the keys to the White House, prompting investors to avoid premature judgments. The market’s clear direction between the historic possibility of the first female president and the potential second term of Trump is expected to emerge only the day after the vote count is completed.

On the 5th (local time), in the New York stock market, Trump beneficiary stocks, expected to rise if Republican candidate and former President Donald Trump wins, showed mixed trends.

Tesla, a representative Trump beneficiary stock, rose 3.54% that day. Tesla is considered a Trump-related stock as its CEO, Elon Musk, had early on declared support for former President Trump and went all-in on his election.

Bitcoin, a flagship asset of the ‘Trump trade,’ also showed an upward trend. According to Coinbase, as of 7:21 p.m. Eastern Time, Bitcoin was trading at around $69,809, up 2.75% from the previous trading day. Other cryptocurrencies such as Ethereum rose 1.44%, and Solana jumped 5.68%. Earlier, former President Trump had announced plans to dismiss Gary Gensler, chairman of the Securities and Exchange Commission (SEC), who has taken a negative stance on cryptocurrencies, signaling a pro-cryptocurrency policy stance.

On the other hand, Trump Media & Technology Group (DJT) fell 1.16% that day. DJT operates Truth Social, a social networking service owned by former President Trump, and its stock price has fluctuated significantly according to Trump’s polling numbers. As of 7:19 p.m. Eastern Time, DJT’s stock showed extreme volatility, rising 6.92% in after-hours trading.

In the bond and foreign exchange markets, trends opposite to the ‘Trump trade’ were prominent. U.S. Treasury yields and the dollar value, which had risen whenever Trump’s chances increased, showed declines. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 3 basis points (1 bp = 0.01 percentage points) to 4.27% compared to the previous day. The dollar index, which measures the dollar’s value against six major currencies, traded around 103.32, down 0.45% from the previous day. The market had expected that a Trump victory would push Treasury yields and the dollar higher due to tariff increases causing inflation and tax cuts expanding the fiscal deficit, especially in long-term bonds.

Wall Street analysts noted that with the election polls showing a razor-thin race, investors are refraining from betting on either side’s victory. Ryan Detrick, chief market strategist at Carson Group, said, “There has been a noticeable hedge flow in anticipation of potential uncertainty and drama surrounding Washington. Now that election day has arrived, some of that hedge investment is expected to unwind.”

Currently, the U.S. presidential election is in a chaotic state with Vice President Kamala Harris and former President Trump locked in an extremely close race, making the outcome difficult to predict. According to preliminary exit poll results by Edison Research, Vice President Harris holds a 48% favorability nationwide, ahead of Trump’s 44%. The key lies in the seven battleground states. Polling results in these decisive states remain divided among polling agencies even up to the day before the election. In a survey by political media outlet The Hill and Emerson College the day before, Trump led in four states, tied in two, and trailed in one among the seven battleground states. However, two days earlier, a New York Times (NYT) and Siena College poll showed the opposite, with Harris leading in four states, tied in two, and trailing in one.