The 2024 U.S. elections are approaching, and the financial world is closely watching the two candidates. Vice President Kamala Harris is focused on continuing the current economic policies, with an emphasis on social justice, infrastructure expansion, and investments in renewable energy.

Converesely, her challenger, Republican candidate Donald Trump, is promising deregulation and tax cuts for businesses to stimulate economic growth.

The outcome of the November 5th elections could have considerable market implications, which include the Swiss financial sector. What kind of impact? Five representatives from Swiss banks offer their insights.

Reto Cueni, Chief Economist, Vontobel

Reto Cueni (Image: zVg)

Given that the U.S. is the world’s largest financial market, any post-election disruption would likely resonate in Switzerland as well. 

The critical question is which election outcome could most affect the U.S. financial sector, especially if results defy expectations: that would be the case if the results are unexpected, meaning they deviate significantly from expectations. For example, if polling suggests a win for Kamala Harris with a «divided» Congress (one chamber controlled by Republicans, the other by Democrats), but the outcome is a victory for Donald Trump with a «unified» Republican Congress, we anticipate a considerably higher U.S. budget deficit and a noticeable rise in U.S. Treasury yields.

A similar rise in interest rates due to higher deficit expectations occurred during Trump’s first term (with a «unified Congress») and led to a global uptick in interest rates, causing bond prices to fall but also boosting U.S. stock markets and strengthening the dollar.

In such a scenario, bond yields in Switzerland could also rise, and the stock market might get a boost. However, the Swiss stock exchange might react cautiously in sectors heavily reliant on U.S. exports, as Trump's proposals for higher import tariffs could negatively affect certain Swiss companies.

Overall, we believe that a «divided Congress» would be the most reassuring scenario for financial markets, as it would limit the President’s spending power and lead to a smaller budget deficit. Additionally, the reduced uncertainty regarding the upcoming presidency and the composition of the U.S. Congress tends to be positively received by financial markets, both in the U.S. and Switzerland.