The US presidential election is upon us.
It’s scheduled for Tuesday, November 5, so all the action will be a day later here in New Zealand.
Polls will close in some East Coast states in the early afternoon our time, while in the likes of California and Alaska it’ll be later that evening.
Coverage of the vote count will take place on Wednesday night, and we might know the outcome by early Thursday morning.
Unless it’s a close one, that is.
It’s not unusual for Americans to wait days or weeks before they know the outcome.
The election of 2000 was one notable example.
George W. Bush and Al Gore were both vying for the Presidency, and it came down to Florida.
It was close on election night.
The TV networks first called it for Gore, before changing that call to Bush, then Gore conceded before rescinding that concession.
Voters then had to sit through five weeks of recounts and court rulings.
It took a Supreme Court decision, which remains controversial today, for Bush to be officially declared the winner in mid-December.
This time around, recent polls are within the margin of error, which suggests it’s too close to call.
That bodes well for former President Donald Trump, who performed much better than the polls suggested in both 2016 and 2020.
Maybe that’s why the betting odds are tilted in his favour and punters view Trump as the favourite.
As is often the case, the result will likely be decided by a handful of swing states that could go either way.
Pennsylvania looms large as one of the big prizes.
It carries 19 electoral college votes, higher than many of the other battleground states.
It proved to be a tipping point in 2020, when Biden flipped it back to the Democrats.
Ohio is another to watch closely.
In the 25 elections in the last 100 years, Ohio has picked the winner on all but three occasions.
It’s status as a bellwether came into question in 2020 when it stumbled by voting for Trump, who then lost.
Before that, the good people of the Buckeye State had picked the winner in 14 consecutive elections starting in 1964.
If Trump wins another term, there are several takeaways for investors.
More tariffs are likely, with China set to be in the crosshairs once again.
The President has a lot of room to move here, without the approval of Congress.
Tariffs are inflationary, so we might see longer-term US interest rates rise as the yield curve steepens.
This “America First” approach could be a positive for the US manufacturing sector, and it would support the US dollar.
The NZ dollar has slumped below US$0.60 on the back of these expectations, which the Reserve Bank will be keeping a close eye on.
A big part of our decline in inflation has been the falling cost of imports.
However, if a weaker currency puts that trend at risk, it could mean less aggressive OCR cuts in the months ahead.
Trump will also be looking to extend his own tax cuts from 2017, which are set to expire at the end of next year.
In contrast to tariffs, the degree with which he can do that might depend on how successful his Republican colleagues are in Congress.
We should also expect less regulation under Trump, as was the case during his first term.
Many of Trump’s policies are pro-growth, business friendly initiatives, so a Trump win could spur further gains for US shares, at least for some parts of the market.
We might see some of the more cyclical sectors perform well, with industrials, energy and financials and some of the potential beneficiaries.
Smaller companies could also see outsized benefits.
Investors have started positioning for all of this, although markets like certainty so there’ll be more to come if Trump pulls it off.
In contrast, a victory for Vice President Kamala Harris could see a sharp reversal of some of the recent price action.
It’ll be a tight race, but Trump might just have the edge heading into next week.
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.
Mark Lister
Investment Director
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.