Market Turmoil: Between Euphoria and Caution in US Elections

Although the Citi strategists do not view the influence of either U.S. presidential candidate as positive for the stock market, a Republican victory could prompt investors to reconsider their market positions. In particular, with a Donald Trump victory, analysts warn against relying on initially euphoric market reactions, as these could quickly fade. Recent market enthusiasm is often linked to the increased chances of a Trump victory, but the city strategists suspect that other factors, such as the sentiment of a soft landing and continuous growth through artificial intelligence, play a larger role. These factors have significantly influenced the performance of the S&P 500 throughout the year. In a report published on Tuesday, the analysts emphasized their tendency to withdraw capital if further Trump-induced market increases occur after the election. They pointed out that the real impact of the election on the fundamental aspects of the stock markets might only become apparent in the coming year and could primarily lead to confusion. The political platforms of both Trump and Harris do not appear particularly market-friendly to the Citi strategists. While Trump's focus on deregulation and lower corporate tax burdens is seen as potentially profit-enhancing, his proposal of high import tariffs could pose long-term risks. For Kamala Harris, on the other hand, the analysts see short-term entry opportunities during market setbacks, despite the negative impacts of higher corporate taxes. A victory by her might initially exert pressure on the market but would also offer opportunities to capitalize on perceived weaknesses.