Tuesday, November 5, 2024

Election Day Volatility

Brace for potential wild market swings. Election days bring opportunities, but also risks.
Unclear results can increase volatility further.

Betting markets have been leaning towards a Trump victory, but reports suggest that this was due to a few big betting hands. But these odds have started to shift against Trump over the last week.
Likewise, recent polls have started to shift in favour of Harris, as against a Trump-leaning dynamic until the end of last week.
Still, all races appear to be within margin of error and the race to the White House remains a tight one.
Small margins could decide this election, as seen in 2020 and 2016.

270 EC votes needed: Harris likely starts with 226 EC votes, Trump with 219. Use 270towin.com to track.
Seven swing states: These 93 votes could tip the scale.
Turnout is key. More younger voters and women voters coming out could be favourable for Harris.

Exit polls embargo lifted at 11:00 PM CET (Tuesday).
Ballot processing starts early in several key states, but projections only come once polls close.
Polling closing times for swing states:
- Georgia (GA): 1:00 AM CET
- North Carolina (NC): 1:30 AM CET
- Pennsylvania (PA): 2:00 AM CET
- Michigan (MI): 2:00 AM CET
- Wisconsin (WI): 3:00 AM CET
- Arizona (AZ): 3:00 AM CET
- Nevada (NV): 4:00 AM CET
Close margins could trigger recounts, particularly in swing states with tight races. A recount could delay final results by several days.
Florida also reports at 1:00 AM CET and is quite quick to count its vote - so strong swings in the result relative to 2020 there might be interesting for markets. Some of the states are woefully slow to count their votes - particularly Arizona. See this article for a full rundown state by state to get a sense of how long it could take for a result to be known.

FOMC (25bp cut expected)
China NPC Standing Committee – meetings end on Nov 9 but signals are that local government debt ceiling could be raised which could alleviate financial strain and free up funds for infrastructure and consumer spending. Measures could be enhanced in case of a Trump 2.0.
BoE meeting (25bp cut expected)
Major earnings reports – Qualcomm (Wed after close), Moderna (Thu before market), Arista (Thu after close), Rivian (Thu after close), Pinterest (Thu after close) Airbnb (Thu after close)

Stock indices
- S&P500 -> SPX / SPXW / ES futures / XSP
- Nasdaq -> NDX / NDXP / NQ futures
- Russell 2000 -> RUT / RUTW / RTY futures
- Asian markets could be the first to react: CN50, HK50, ASX200 and NKY225
- (VIX)
ETFs - American options, which risk assignment
- SPY (S&P 500 ETF)
- QQQ (Nasdaq 100 ETF)
- IWM (Russell 2000 ETF)
Stocks
- Tesla
- Big Tech
- Energy (oil) and Finance stocks (XLF)
- Euro defence stocks
- DJT
Metals
- Gold (futures and/or ETF's)
- Spot gold XAUUSD
- Silver is usually even more volatile
FX channels:
- USDJPY
- USDMXN
- USDCNH
- EURUSD
- AUDUSD
Rates
- US SOFR Futures (Short rates on Fed anticipation)
- US 10-year futures

Republican Sweep: Higher Treasury yields and USD, Gold up; Banks and small caps could rally, Crude Oil may rally, Tariff risks could hurt China, HK, Australia and other Asian markets
Trump Gridlock: Yields lower and USD falls, Gold could drop sharply. Relief for tariff-exposed assets.
Harris Gridlock: “Trump trades” may reverse; USD, gold, Bitcoin, US equities could dip. Relief for tariff-exposed assets.
Democratic Sweep: Sharp drop in Treasury yields and USD, equities could fall. Relief for tariff-exposed assets. Positive for clean energy, oil could fall.