Wall Street Adapts as Harris Gains Ground in Presidential Race

Wall Street Adapts Harris: The U.S. presidential race has taken a dramatic turn, causing Wall Street to scramble as Democratic candidate Vice President Kamala Harris gains momentum against the previously favored Republican, former President Donald Trump. “More volatility appears to be the most foreseeable outcome in the short term,” said Brian Mulberry, client portfolio manager at Zacks Investment Management. “This could create pricing inefficiencies and opportunities for active managers to rebalance their risks.”

Harris Surges After Biden’s Endorsement

Harris’s prospects have surged since President Joe Biden exited the race and endorsed her on July 21. Polling data from Real Clear Politics shows Harris leading at 48.4%, with Trump trailing at 46.9% nationally. Before Biden’s withdrawal, Harris was at 46.2% and Trump at 48.1%.

Harris’s prospects have improved significantly since Biden’s endorsement, now leading Trump by 1.5%, according to wsj online.

Market Shifts Reflect Polling Changes

The market has mirrored this polling shift. Goldman Sachs Group Inc.’s indices indicate that Democratic strategies began outperforming Republican ones shortly after Biden’s exit. Options positioning suggests traders are seeking more protection against volatility around Election Day, despite overall volatility remaining below historical averages.

Wall Street Revises Election Outlook

Institutional outlooks are also adjusting. UBS Group AG’s wealth management division recently projected that a Harris victory with a divided Congress is the most probable scenario. Goldman Sachs has revised its election-related trading strategies, adjusting for lower odds of a Republican sweep, although it still considers this the most likely outcome. JPMorgan Chase & Co. now views the election as a toss-up after previously favoring a Trump win. Wall Street Adapts Harris to these shifting predictions, reflecting a more dynamic view of the political landscape.

Sector-Specific Impacts

Private-prison operators and gunmakers have experienced stock fluctuations. GEO Group Inc.’s shares jumped from $13.50 to $18 before falling back to $13.50. CoreCivic Inc.’s stock followed a similar pattern. Gunmakers Sturm Ruger & Co. and Smith & Wesson Brands Inc. also saw their shares rise and then fall post-debate.

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Broader Economic Effects

The impact on assets like government bonds and global currencies is less clear. The weakening dollar, influenced by the Fed’s interest rate cuts, contrasts with Trump’s strong dollar stance. “The increasing likelihood of a Democratic victory has led to a reversal of ‘Trump trades,’ including the stronger dollar outlook,” explained Thierry Wizman, director of global currencies and interest-rate strategist at Macquarie Futures.

Cryptocurrency and Sectoral Winners

Trump’s support for cryptocurrencies and a desire for U.S.-based Bitcoin production seem to have less impact on Bitcoin’s value now. Conversely, a Harris win could benefit industries such as renewable energy, electric vehicles, and utilities. A potential trade war with China under Trump might trigger a relief rally for industries reliant on the Asian market if Democrats retain the White House.

Political Advertising Boost

Political advertising spending is expected to exceed previous projections due to the intensified race, with online advertising company Trade Desk Inc. identified as a “clear beneficiary” by Piper Sandler analyst Matt Farrell.

Conclusion

As the presidential race continues, it remains early for definitive market positioning. Investor sentiment is likely to shift as summer turns to fall, with many observers anticipating a tight finish. Investors and strategists recommend patience before committing to positions.

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