Election Day is just a week away, and the results will have broad market implications regardless of who wins or which party controls which chamber of Congress. With the U.S. presidential election approaching on November 5, the stock market is exceptionally strong, with all three major stock indexes at or near record highs, even as Treasury yields continue to rise. On Tuesday, the Nasdaq hit a new high for the second time in three days. But whatever the outcome is on Nov. 5, it has the potential to roil markets — especially since the race between former President Donald Trump and Vice President Kamala Harris is extremely tight, according to the latest NBC News poll. Mike Mullaney, director of global markets research at Boston Partners, wrote in a recent paper: “Whatever the outcome of the election, there will certainly be a lasting impact on U.S. and global markets.” The two candidates have very different policies. In addition to raising tariffs and mass deportations of illegal immigrants, Trump has also promised massive tax cuts for companies and individuals. Harris promised higher taxes on corporations and the wealthy and expanded spending on housing and health care. However, both countries will implement policies that increase already large budget deficits. Bond investors may have also taken notice of the concern, briefly pushing the benchmark U.S. 10-year Treasury yield to around 4.34% on Tuesday. Here’s how stocks reacted to various outcomes. Regardless of whether the Republican Party sweeps Trump, whether the Republican Party sweeps Congress or not, a Trump victory and an uncontested Republican sweep of Congress are expected to be positive for the stock market. The market seems to have priced in this outcome. Not only are all three major stock indexes at or near record highs, but the outperformance of bank stocks in particular suggests that the banking industry will further play a cyclical leadership role if Trump wins the November election. The SPDR S&P Regional Banking ETF (KRE) has gained nearly 5% since the start of the fourth quarter on October 1, while the S&P 500 is ahead by just over 1%. Julian Emanuel, senior managing director in Evercore ISI’s equity, derivatives and quantitative strategy team, predicted the vote could lead to a “‘circuit breaker'” that would push the S&P 500 higher at It exceeded 6,000 after the election and will reach 6,300 by the end of the year. Other market watchers also expected a Republican sweep to be positive for stocks. “If you do give Trump a big win, you’re going to get into cyclical trouble,” 3Fourteen Research co-founder Warren Pies said Friday on CNBC’s “Closing Bell.” At first glance, the market “may be indigested,” “and then suddenly everyone realizes, yes, but nominal GDP is going to be very strong. So, let’s buy into this market,” he said. Emanuel wrote that if Trump wins but Congress is divided, the S&P 500 could remain stable in the days following the election. However, this scenario is most likely a “market circuit breaker” scenario, where the S&P 500 could surge above 6,450 during the already seasonally strong months of November and December. A Harris victory, including sweeps in the House and Senate, is expected to provide a negative surprise to markets in the days after the Nov. 5 election, regardless of whether Democrats sweep Harris. Evercore ISI expects the S&P 500 to fall to around 5,700 within 10 days after the election as the market reprices its expectations. But even in this case, the broad market index is still expected to surge to around 6,200 points by the end of the year. “I think you’re probably going to get an opportunity after the election to put your money to work,” Jeff Schulze, head of economics and market strategy at ClearBridge Investments, said on a media webcast last week. Pies, co-founder of 3Fourteen Research, expects a Harris win to lead to a cycle S&P stocks and small-cap stocks fell and spurred a shift into high-quality technology stocks. He expects bond yields to fall back to their highs. However, a Harris win and a divided Congress could cause the S&P 500 to fall immediately after the election, to about 5,525 points, according to Evercore ISI. In this outcome, the S&P 500 could end the year little changed from where it is now if the election results are less contested; if the election results are highly contested and the transfer of power could be disrupted, the S&P 500 could end the year little changed. It fell to 5,675 points in January, Evercore ISI’s Emanuel said.
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