Stock markets this week: presidential election, Fed meeting and more

This week in the stock markets, key events include the upcoming presidential election, which could influence investor sentiment, and a critical Federal Reserve meeting that may shape monetary policy. Traders are closely monitoring these developments, as they could significantly impact market dynamics and investment strategies moving forward.

How the Upcoming Election May Impact Investment Trends

As Election Day approaches, a pivotal question arises: how will the potential victories of Donald Trump or Kamala Harris shape market trends for the rest of the year and beyond? Investors are poised for answers as Americans prepare to cast their votes next Tuesday. In the week preceding the election, market movements reflected uncertainty; the S&P 500 (^GSPC) fell approximately 1.37%, while the tech-heavy Nasdaq Composite (^IXIC) saw a 1.5% decline, despite reaching its first record close since June.

Meanwhile, the Dow Jones Industrial Average (^DJI) experienced a modest drop of just over 0.1%. These fluctuations indicate that investors are navigating a landscape of heightened volatility and cautious sentiment as they anticipate the implications of the election outcome on economic policies, regulatory changes, and overall market stability. The coming days will be crucial in determining how these political developments may influence investment strategies moving forward.

Fed Rate Decision and Major Earnings Reports Ahead

This week is packed with significant events beyond the upcoming election. On Thursday, the Federal Reserve is set to announce its latest policy decision, and markets are largely expecting a quarter percentage point cut in interest rates. This potential shift could have far-reaching implications for borrowing costs and overall economic activity, further influencing investor sentiment.

Earnings season continues to gain momentum, with several high-profile companies reporting their financial results. Key earnings reports this week will come from Palantir (PLTR), Super Micro Computer (SMCI), Arm (ARM), Qualcomm (QCOM), and Moderna (MRNA). Investors will be keenly analyzing these reports for insights into industry performance and future growth prospects. As both the Fed's decision and corporate earnings unfold, market participants will be closely monitoring how these developments intersect with the election results and their broader impact on market dynamics for the remainder of the year.

Election Risk and markets uncertainty

The much-anticipated 2024 presidential election is set for Tuesday, November 5, marking a significant event that strategists have discussed all year. However, this election cycle has been unusual for markets. According to Ryan Detrick, chief market strategist at Carson Group, October was the second-least volatile month leading up to an election in the past 50 years, based on the S&P 500's average intraday trading range.

Looking at the broader picture, research from Bespoke Investment Group indicates that the S&P 500 has had its best start to an election year since 1932, boasting a 20% year-to-date return through the end of October.

Nonetheless, Election Day itself remains a risk event for markets. Speculation about a "Trump Trade" has emerged as the former president's odds of winning have increased. However, some strategists are unsure about which outcome investors will prefer.

"I believe the market would perform well under Harris or Trump," said Eric Wallerstein of Yardeni Research. He added that the stock market isn't distinctly pricing presidential odds. Franklin Templeton’s Stephen Dover noted that simply resolving the election, regardless of the outcome, could be beneficial for the markets. Baird's Michael Antonelli echoed this sentiment, stating that the biggest risk would be a scenario where the winner remains uncertain.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.