The US presidential election is an important topic for traders because of the impact it has on the markets. I want to look at the big picture first, then at how each presidency might feel to trade.
I am not getting into the politics. I only care about the effect on the markets, whether it is Trump or Harris, and how you can prepare for either one.
Key takeaways
Each candidate has different policies on spending, tax and interest rates that push the dollar in different ways.
Lower corporate tax can boost the currency, but pressure to cut interest rates can weaken the dollar short term.
A focus on government spending, infrastructure and climate tends to feed inflation, with any decline more of a long-term trend.
The dollar might dip in the short term and recover later, or the other way round, so separate the two horizons.
Like 2016, an active tweeting president creates day-to-day volatility and a lot of trading opportunities.
Expect less volatility, with growth or decline showing up over the long term rather than day to day.
The big picture on policy
Trump’s policies reduce government spending on things the government usually provides, like housing and education. At the same time he cuts the corporate tax rate.
Lower corporate tax usually boosts the currency. But he also pressures the Fed to cut interest rates, and lower rates usually weaken the currency, even if they help the economy longer term.
So in the short term the US dollar may lose value on the rate side, while the tax side pulls the other way. It is a mix, not one clean direction.
What a Harris presidency could look like
Harris focuses on government spending, infrastructure and climate initiatives. That kind of spending impacts inflation.
We can already get a sense of it because she is vice president now, and we are seeing inflation move. The dollar does increase sometimes, but the overall trend is more downward.
In the short term the dollar might get a boost, and over the long term it might come down. That is based on predictions, on what she has said and done as vice president.
The day-to-day is where it gets interesting
The long-term direction of the dollar matters less than the day-to-day action. In 2016 there was a lot of volatility, and traders had a great time trading it.
The biggest reason was that Trump was always tweeting, and those tweets moved the markets massively. His Twitter became like a second chart for traders, who watched it and traded on it.
If he becomes president that could happen again, on whatever platform he uses. He is active, so on a day-to-day basis he will be influencing the market. Lots of opportunities.
“Trump’s Twitter became like a second chart for traders. They would look out for what he is saying and trade on it.”
How to prepare either way
Under Trump, expect more day-to-day volatility. The long-term dollar move matters less than the constant flow of opportunities from an active president.
Under Harris, expect less volatility, with the growth or decline showing up in the long term rather than the short term.
Either way, do not get too focused on the political side. Focus on the impact it has on the markets and prepare yourself for the environment each one creates.
Get set for election volatility by comparing prop firms on Propvator before the moves start.