What could stop the stock market from recovering? Certainly not the election. In a year when almost half the world’s population is going to the polls, stock markets are hitting one record high after another. What if geopolitical tensions persist? What if central banks scale back expectations for interest rate cuts? Investors are not deterred by any news. Neither the internal clashes in Europe scare them, nor the shocking image of the debate between Joe Biden and Donald Trump.
A visibly overwhelmed Biden, who was losing his composure of thought and speech, was confronted by a Trump who did not shy away from exaggeration and lies, but was courageous, steady and generally more composed. As the decision was being made, the dollar rose, as did US stock futures, while the Chinese yuan, Japanese yen, euro and Mexican peso were under pressure.
After the debate, markets increase the odds of Trump’s victory to more than 65% (compared to 55% before). They also believe that the return of the former US president to the White House will be positive for the stock markets, despite the trade wars he is preparing to declare.
The American media commented that after the debate citizens are worried about the choices they seem to have at the polls. Investors, on the other hand, if we judge by the evolution of the indicators so far, are completely calm.
31 records since the beginning of the year
On Wall Street – which gives direction to the other markets – in the first half of the year we had an endless party. The S&P 500, the most representative index of the North American market, has broken its historic record 31 times since the beginning of the year. This equates to a new all-time high every four sessions.
With investors fearing high interest rates, inflation, a chaotic political and global environment and general economic uncertainty, the S&P 500 rose 15% in the semester. According to data from Goldman Sachs, these are the best 6 months of an election year ever.
Average in election years the US index has a yield of 7%, as shown by an analysis by LPL Financial. Even in election years, when an incumbent runs for a second term, the S&P 500 averages Profit of 12.2%. The US index has recovered 31% from the lows of 4,117 points it fell to in October 2023.
For the Nasdaq – which is clearly overweighted by technology companies – the performance is even better. Gains of 19% year-to-date, with a highlight being the impressive performance of Nvidia (+150% in the half-year). With +20% share for Microsoft, +27% share for Amazon and +11% share for Apple.
Smiles all over the world
It’s not just the US markets that are making gains. MSCI Global All Country Index records 10% profit per semesterthe pan-European index Stoxx 600 rose around 7% and the Asian MSCI Asia-Pacific is +6.15%. With a profit of 3.95%, he says goodbye to the 6-month period Hang Sengwhile the performance of the Japanese is spectacular (18.28%). Nikkeis.
However, it should be noted that the boost in Japanese stocks comes mainly from the depreciation of the yen, which fell to a nadir of 38 years against the US dollar. The euro also lost 3.15% in the 6-month period against the US currency, which continues to dominate foreign exchange markets.
It is worth mentioning how markets identify themselves in 64% the chances of a first rate cut by the Fed in September. However, financial analysts believe that this could happen even later, at the end of the year.