U.S. elections are due on November 5, but according to Octa broker, the financial market is already voting

The market has voted live as Vice-President Kamala Harris and former President Donald Trump clashed in their first—and possibly last—debate before the November election. With financial markets already reacting to the debate’s fallout, discover how the candidates’ performance and policies could reshape trading strategies and what it means for your long-term investment portfolio and short-term trading decisions.

Vice-President Kamala Harris, a Democratic candidate, and former President Donald Trump, a Republican nominee, met in an ABC-hosted debate in Philadelphia on Tuesday. The presidential race is too close to call, and the outcome could still swing either way, so it is important to analyse the results of the debate and draw some conclusions from it. Moreover, early voting will start in some states just days after the debate and may impact the election result. Although it was the first debate between Trump and Harris, it will also likely be their last before the November 5 election. The debate was quite combative, with candidates attacking each other’s track record and fitness for office in a usual political rivalry along ideological lines. However, we are mostly concerned with the possible implications for the financial markets and traders.

Harris Trade

Political analysts and the news media generally agree that Harris outperformed Trump. After the debate, the Reuters/Ipsos poll, which took place between 10 and 12 September, found Harris 5 points ahead of Trump (47% vs. 42%). In percentage terms, her chances of winning improved to 55%, while that of Trump decreased to 47%. The market initially reacted by selling the greenback and stocks, with the U.S. Dollar Index (DXY) dropping below 101.40 and S&P 500 shedding more than 1.5% at one point in time. ‘The market’s reaction to the debate has revealed everything a trader needs to know about the upcoming election. The financial market is already voting with their money. You can clearly see it everywhere, from the exchange rate of the Chinese yuan to the share price of U.S. solar companies,’ said Kar Yong Ang, a financial market analyst at Octa Broker.
A few months ago, market participants started to practice a concept known as the ‘Trump Trade’. Generally, a ‘Trump trade’ refers to shifts in market behaviour that occur in reaction to the economic policies and political decisions associated with a Donald Trump presidency. For example, a typical Trump trade is to go long (to buy) U.S. stocks because Trump’s focus on deregulation and tax cuts is seen as favourable for corporate profits (for more information, please refer to Octa’s previous article about the impacts of the U.S. presidential elections). Another Trump trade is to buy the U.S. dollar (USD) and sell the Chinese yuan (CNH) because Trump’s proposals on trade tariffs are expected to hurt Chinese exports and improve U.S. current account balance.

‘As Kamala Harris took the lead, we have seen a very clear reversal of Trump trades. Actually, I believe we have seen the emergence of ‘Harris Trade,’ said Kar Yong Ang.

Indeed, if we break down key market moves during and after the debate, we see Harris trade taking shape and Trump trade losing its appeal. So, what exactly is Harris trade?
Overall, the stock market remains nervous. The CBOE Volatility Index, also known as ‘fear index’, which measures demand for insurance against sharp swings in stock valuations, was trading at around 20 mark just before the debate started. This was higher than the 2024 average of 14.8. Kar Yong Ang explains: ‘Of course, the market is concerned about who becomes the next president of the world’s largest economy, but frankly, U.S. elections is just one of many other issues that keep traders on edge. Firstly, the makeup of the Senate and the House is also important as they will also shape and hone future economic policies. Secondly, and perhaps most importantly, investors are worried about a potential U.S. recession and the Fed’s [Federal Reserve, the U.S. central bank] monetary policy going forward.’

Indeed, the Fed’s commitment to cutting interest rates has already driven the value of the U.S. Dollar Index (DXY) to multi-month lows, and its plan to pursue a less tight monetary policy has been a major factor in driving the gold price to an all-time high. Indeed, macroeconomic news—notably, inflation data releases and labour market reports—have been producing much stronger market reactions than news related to the U.S. presidential campaign. Furthermore, it is unclear whether debates or other political events can change the race dynamics, given that the vast majority of Americans have already decided who they are going to vote for. Undecided voters make up only a tiny share. Therefore, while election news will continue to generate above-normal market volatility in the run-up to the November 5 election, the key events to watch will be the classical data releases and central banks’ statements.