US elections: What the markets are watching

Electoral context and market nervousness: As the US elections approach, markets are reaching historic highs, particularly in anticipation of a Trump victory.

Electoral context and market nervousness 📉

As the US presidential elections approach , financial markets are reaching historic highs . The current momentum reflects anticipation of a victory for Donald Trump , perceived as a pro-business candidate .

Despite this rise, the VIX index —often called the "fear index" —remains at a low level , reflecting relative investor confidence . However, this climate could change rapidly depending on the election results.

The impact of candidates on economic sectors ⚙️

The economic programs of the two main candidates influence the sectors differently :

• A victory for Kamala Harris would favor renewable energy .

• A second Trump term would benefit the oil and technology industries .

Investment strategies could therefore diverge depending on the winner of the election .

Monetary policy and government bonds 💵

The US Federal Reserve (Fed) will have to adjust its monetary policy according to the post-election context:

• If Harris wins , further rate cuts are expected.

• If Trump is elected, a rise in inflationary pressures is likely, which could force the Fed to raise its rates .

This would impact government bond yields , and therefore the entire bond market .

Market reactions and upcoming challenges 📊

The nomination of JD Vance as Trump's running mate has boosted market optimism , especially in the oil sector .

However, with valuations already high , a Democratic victory could lead to a market correction , forcing investors to revise their portfolios .

Evvest analysis 🔎

The US elections always have a direct impact on the markets . The coming weeks will be crucial in defining the allocation strategies to adopt.

At Evvest , we recommend:

• To remain exposed to the United States , while maintaining international diversification .

• To closely monitor inflation indicators , which could strongly influence the Fed and therefore the bond and stock markets .

Buffett reduces his stake in Apple: a sign? 🍏

Warren Buffett reduced his position in Apple by 25% in Q3 2024 , increasing his cash to a record $325 billion .

• Apple remains its largest position , but this move raises questions about current valuations .

• Let us remember that Buffett has been wrong in the past , such as with Bitcoin , which exceeded $70,000 despite his criticisms.

Conclusion: Stay agile and informed 🧭

The 2024 US elections are shaping up to be a turning point for financial markets . Depending on the winner, the sectors that benefit and monetary policy could diverge significantly.

At Evvest , we advocate an approach:

• Responsive to electoral volatility.

• Diversified to cushion potential shocks.

The watchwords: anticipation, discipline and adaptability .

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My Little Financial Lexicon

VIX Index:

• What is this ?

  
  

  The VIX index, often called the "fear index," measures the expected volatility of the stock market over 30 days. It's a bit like a barometer of investor anxiety.

• Why is this important?

  
  

  If the VIX is high, it means that many investors expect significant market fluctuations, which can signal uncertainty.

Government bonds:

• What is this ?

  
  

  These are loans granted to a government. In exchange, the government repays you with interest.

• Examples:

  
  

  US Treasury bonds or bonds issued by France.

Monetary policy:

• Bulk :

  
  

  This is how a central bank (like the Fed in the United States) manages money in the economy. This includes decisions about interest rates and how money circulates.

• Aim :

  
  

  Maintain a stable economy, encourage employment and control inflation.

Fed (Federal Reserve):

• Who is it ?

  
  

  It is the central bank of the United States, responsible for monetary policy. It decides how much money is in circulation and sets interest rates.

• For what ?

  
  

  The Fed's decisions can influence the entire economy and financial markets.

Bond yield:

• What this means:

  
  

  Bond yield indicates how much money you can earn by holding a bond, such as government bonds. It is expressed as a percentage of the purchase price.

• Importance:

  
  

  Government bond yields serve as a benchmark for other investments and for determining interest rates in general.

Valuation:

• In simple terms:

  
  

  Valuation is the process of determining the value of a stock, a company, or an asset. For stocks, it helps determine whether they are expensive or cheap relative to their true value.

• How does it work?

  
  

  Analysts use different methods, such as earnings forecasts or cash flow analysis, to make these assessments.