locate an office

offices near you

office near you

Economy & Markets

U.S. election recap: What could GOP policies mean for investors?

Donald Trump has been elected President again. TV networks called the race at around 6:30pm SG/HK time, and the AP called the race shortly after. A win in Wisconsin put him over the 270 electoral college vote threshold.

The market responded as we expected in the event of a Republican sweep—U.S. large-cap stocks, small-cap stock, and bond yields were all sharply higher.

S&P 500 was up another +2.5% on top of previous day’s +1.1% gain. On Tuesday before election day, all 11 sectors were higher, and breadth was the best since August (87% of constituents finished higher).

Small-cap stocks were up +5.9% on top of previous day’s +1.9% gain, and are at one-year highs. The VIX Index (a measure of implied volatility) was collapsing ~5 points because the election outcome became clear so quickly. On the other hand, Hong Kong’s Hang Seng Index was down around -2.5% from previous day’s highs.

Election day’s market performance

Asset class returns, %

Source: Bloomberg Finance L.P. Data as of 8pm SG/HK time, November 6, 2024.
Bond markets reacted strongly to the move. Ten-year yields were up 16 basis points (bps) to 4.43%. The yield curve steepened. Two-year yields were “only” higher by 8 bps.

Yields have pushed higher post election results

2 and 10-year yields year-to-date

Source: Bloomberg Finance L.P. Data as of November 6, 2024.

In commodities and currencies, gold was down (-2.9%) $2,664/ounce, as was oil ( -0.8% to $74.9/barrel). Bitcoin traded at all-time highs and has gained 10% over the last few days.

The key takeaway from the price action is that markets are more focused on the pro-growth policies rather than the risks of tariffs or increasing deficits. Bond yields are higher, but so is the dollar, and risk markets performed exceptionally well. Sectors that are exposed to regulatory risk, such as small-cap banks, also performed well. If deficit concerns were the focus, the dollar and stocks would be weakening as bond yields rose.

Your election recap

President Trump is on track to win every swing state. Republicans have won control of the Senate, and while the House of Representatives is still officially a toss-up, markets seem to think Republicans will win a slight majority. There are still 40 seats outstanding in the House, and it could take several days to a week to declare winners in all of the outstanding races.

2024 U.S. Elections Dashboard – Presidential race

Map of U.S. Electoral College vote

Source: BallotPedia and Politico. Data as of 8pm SG/HK time, November 6, 2024.

Even if Republicans do end up winning the House, it seems as if their margins will still be slim. This means that negotiation and compromise will still be necessary for major policy proposals. Here is an updated look at the key issues.

On taxes: While there is still a long way to go in Tax Cuts and Jobs Act extension negotiations, it seems as if the “worst-case” market outcomes may have been avoided (e.g., higher taxes on capital gains, QDI treatment and tax exemption of municipal bond income). That said, a full extension of the TCJA may not be palatable to members of Congress who are worried about the deficit. The provisions of the TCJA won’t expire until the end of 2025, so we wouldn’t expect decisions to be made until the back half of next year. 

If fully extended, personal tax rates will stay at current levels outlined in the chart below:

Income taxes pre and post Tax Cuts & Jobs Act

Average individual income tax rate, %

Source: Internal Revenue Service and J.P. Morgan. Data as of December 31, 2019. Pre-TCJA is the 2017 rate. Post-TCJA is the 2019 rate. The Tax, Cuts and Jobs Act took effect January 1, 2018.

Regardless of what may be enacted next year, it is a good time to reflect on giving wealth to future generations, whether outright or in trust if it aligns with your financial situation and goals. That’s principally because all future appreciation on those assets would not be subject to future U.S. estate tax on your (or your spouse’s) death.

On trade: President Trump has proposed an increase on tariffs to 60% on all Chinese goods and up to 10% on all other imports. While higher tariffs on China seem likely, the broad tariffs on all trading partners face much higher legal hurdles. The dollar strengthened as markets perceive that tariffs will extend “U.S. exceptionalism.”

On immigration: The President does garner relatively more power when it comes to immigration policy. President Trump has proposed much stricter immigration measures and an effort to deport asylum seekers. It is anticipated that immigration may slow considerably, though it is notable that during Trump’s previous presidency, he called for the deportation of 11 million immigrants, but there were only about 300,000 deportations per year from 2017 to 2020.

On the deficit: We said that regardless of the candidate elected, deficits will likely increase. As Michael Cembalest pointed out in his paper, Mind the Gap, President Trump’s policies as proposed would increase the deficit by ~$4 trillion. As previously stated, tight margins in the House and Senate will provide a buffer against this type of deficit expansion. That said, the move in bond yields suggests looser fiscal policy, better growth prospects, a higher landing place for the Federal Reserve, as well as higher inflation. 

What we think:

  • More positive:
    • U.S. equities versus rest of the world. We would add cyclicality through tech, industrials and financials
    • Gold and real assets (infrastructure, real estate, etc.)
    • U.S. dollar
  • Neutral:
    • Despite the backup in rates, we would stay neutral duration
  • Less positive:
    • U.S. healthcare, staples and energy (given a less positive view on oil prices)

Election outcomes will likely affect specific asset classes

Street expectations for the impact

This chart shows the implications of a Harris win with Democratic Congress and Divided Congress, and a Trump win with Divided Congress and Republican Congress.
Source: J.P. Morgan Private Bank. Data as of November 6, 2024.
What we think: Now that the President-elect is confirmed, markets can do their job as a forward-looking machine. Volatility tends to fall relatively quickly after the new composition of government is confirmed, and on average, equities are higher 12 months after the election.

Volatility tends to pick up in October, but falls after the election

Monthly Average VIX Index levels, by election year status (1990-2023)

This bar chart shows monthly average VIX Index levels per month from 1990 to 2023, differentiating between election and non-election years.
Source: Bloomberg Finance L.P. Data as of December 31, 2023. *Analysis from 1990-2023.
Said differently, don’t let an election derail your plans—historically, election outcomes don’t drive market returns over the long run. After all, they happen every four years, and since 1950, there have been 18 presidential elections and 10 transitions in the White House between Democrats and Republicans. Over those 74 years, U.S. GDP growth has averaged a 3.2% annual pace, and the S&P 500 has compounded at 9.4% per year. 

Election outcomes do not drive market outcomes over the long-run

U.S. Nominal Gross Domestic Product (GDP), USD trillions, log scale

This chart shows U.S. nominal gross domestic product from 12/31/1930 to 12/31/2023, showing Democratic and Republican indicators as well as Presidents who have been elected via general election.
Source: BEA, Haver Analytics, White House History, J.P. Morgan. Data as of Q4 2023. Democratic and Republican indicator is the party of the president in the White House at that time. Presidents shown include only those who have been elected via general election.

All market and economic data as of November 2024 and sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.

RISK CONSIDERATIONS

  • Past performance is not indicative of future results. You may not invest directly in an index.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.

Index Definition:

  • The Russell 2000 Index measures small company stock market performance. The index does not include fees or expenses.
  • Tokyo Stock Price Index, commonly known as TOPIX, along with the Nikkei 225, is an important stock market index for the Tokyo Stock Exchange in Japan, which tracks the entire market of domestic companies and covers most stocks in the Prime Market and some stocks in the Standard Market.
  • The NASDAQ 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.
  • The EURO STOXX 50 is a stock index of Eurozone stocks designed by STOXX, an index provider owned by Deutsche Börse Group. The index is composed of 50 stocks from 11 countries in the Eurozone. EURO STOXX 50 represents Eurozone blue-chip companies considered as leaders in their respective sectors.
  • The Hang Seng Index is a market-capitalization-weighted stock market index in Hong Kong, adjusted for free float. It tracks and records daily changes in the largest companies listed on the Hong Kong Stock Exchange and serves as the primary indicator of overall market performance in Hong Kong.
  • S&P 500 - The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.
With a Republican victory confirmed, we discuss what might be coming over the next term.

EXPERIENCE THE FULL POSSIBILITY OF YOUR WEALTH

We can help you navigate a complex financial landscape. Reach out today to learn how.

Contact us

Important Information

JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.

The information presented is not intended to be making value judgments on the preferred outcome of any government decision.

This material is for informational purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. Please read all Important Information.

General Risks & Considerations

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g., equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

Non-Reliance

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

© $$YEAR JPMorgan Chase & Co. All rights reserved.

LEARN MORE About Our Firm and Investment Professionals Through FINRA BrokerCheck

 

To learn more about J.P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products. 

 

JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

 

Please read the Legal Disclaimer and the relevant deposit protection schemes in conjunction with these pages.

 

Click to access DPS website.

DEPOSIT PROTECTION SCHEME 存款保障計劃   JPMorgan Chase Bank, N.A.是存款保障計劃的成員。本銀行接受的合資格存款受存保計劃保障,最高保障額為每名存款人HK$500,000。   JPMorgan Chase Bank N.A. is a member of the Deposit Protection Scheme. Eligible deposits taken by this Bank are protected by the Scheme up to a limit of HK$500,000 per depositor.
INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC. Not a commitment to lend. All extensions of credit are subject to credit approval.