ING analyzes three market scenarios by Investing.com

As the 2024 US presidential election approaches, ING has conducted an analysis outlining three potential scenarios and their impact on financial markets.

These scenarios explore the outcomes of different political configurations and their influence on domestic and foreign policies, trade and the wider macroeconomic landscape.

1. Trump clean mature

In this scenario, Donald Trump wins the presidency, Republicans take control of both the House and the Senate. This leads to a renewed focus on extending the 2017 tax cuts and boosting domestic economic growth through initiatives to bring manufacturing back to the US.

However, the administration is expected to delay international policies, including support for Ukraine and decisions on trade tariffs, as it prioritizes domestic concerns.

Market impact:

FX: The US dollar is expected to strengthen due to loose fiscal policy combined with tight monetary measures.

Interest rates: Bond yields are expected to rise, with the 10-year US Treasury yield potentially exceeding 5%.

Commodities: Oil prices may rise initially due to tax cuts, but could fall in the long term as the US focuses on energy independence.

2. Trump under duress

This scenario sees Trump winning the presidency, but with a divided Congress (Republicans controlling the House and Democrats the Senate). The legislative gridlock would likely limit the scope of Trump’s policy, particularly on tax cuts and immigration controls.

Foreign policy could see a deal with Russia over Ukraine and easing tensions in the Middle East.

Market impact:

FX: The dollar may strengthen initially, but this depends on the success of Trump’s foreign policy. A weaker dollar policy could emerge if US growth weakens.

Interest rates: Inflationary pressures from tariffs may push bond yields higher despite some cushion from additional tax revenue.

Commodities: Oil prices could face downward pressure due to easing tensions in the Middle East and a potential Russia-Ukraine peace deal.

3. President Harris

In this scenario, Kamala Harris wins the presidency, while Congress remains divided. The focus would shift to fiscal consolidation, with an end to Trump-era tax cuts and new taxes on corporations and the wealthy.

The Harris administration is likely to maintain strong support for Ukraine and global alliances, along with a more restrained approach to trade.

Market impact:

FX: The dollar could weaken due to a combination of tighter fiscal policy and looser monetary measures.

Interest rates: Lower yield growth is expected as tighter fiscal policies are balanced by a weaker economic outlook.

Commodities: Oil prices may fall initially on lower growth prospects, but continued tensions in the Middle East and unresolved issues in Ukraine could push prices higher towards the end of 2025.