Market Update: The Impact of the 2024 US Elections on Markets and the Future of American Politics
Markets stance
The 2024 US elections have profoundly impacted the market landscape.
Notably, cryptocurrencies have experienced a significant surge, with Bitcoin leading the way, rising by 35% and the index of the new economy NASDAQ increased by 10% and even the WSJ Dollar Index jumped by almost 3% since the US elections in November 2024. By comparison, the broader S&P 500 index rose by only 6% over the same period.
The surge in Bitcoin and NASDAQ reflects market anticipation of a more business-friendly regulatory environment under Republican leadership. Investors expect deregulation and reduced tax burdens, driving a risk-on sentiment in speculative and growth sectors, especially in hi-tech area of economy.
However, it is critical to underline that we maintain a cautious and fundamentally skeptical stance toward cryptocurrencies and new economy and the speculative fervor that often surrounds all of them. Our perspective aligns with a long-term view of risk management, emphasizing the importance of grounded investment principles. That said, we remain cautious about investing in stocks like Nvidia, which has a price-to-sales ratio of nearly 30 compare to Coca Cola with price/sales ratio around 6.
A Closer Look at the Paradigm Shift: From Democratic Majority to Republican Dominance
The political sphere has also witnessed a significant development: the return of Donald Trump to the forefront of U.S. politics. As detailed in our prior analyses, this shift has been evaluated in-depth, and we reiterate that no changes to our overarching strategy are anticipated. Our approach remains firmly conservative, driven by a commitment to stability and disciplined asset allocation. We believe in a fundamental evaluation of the companies and the fact that the price paid should be at least fair.
Let’s take a closer look at the paradigm shift from a Democratic majority to Republican dominance. Many media outlets have highlighted the so-called “red wave”/”red shift” sweeping across the political landscape (see Politico, The New York Times many times, and The Wall Street Journal). This aspect warrants closer examination to better understand what the United States—and indeed, the world—might face over the next four years.
The raw numbers from the 2024 election paint a straightforward picture (AP News). Vice President Kamala Harris secured 226 electoral votes (74981313 popular votes), while former President Donald Trump garnered 312 electoral votes (77266801 popular votes). Notably, Trump claimed victory in all swing states. Additionally, Democrats lost control of both the Senate (47 seats vs. 53 Republican seats) and the House of Representatives (215 seats vs. 220 Republican seats). This suggests a clear and powerful shift toward the Republican Party – or does it?
While a shift in voter preferences is evident, with the Republican agenda proving more appealing to those who voted, it’s crucial to dig deeper into the nuances.
Candidate Selection Matters
Trump’s victory reflected not only ideological appeal but also favorable circumstances. For the second time, he faced a controversial Democratic candidate. In 2016, Hillary Clinton emerged under the shadow of questionable Democratic primary practices (BBC, The Guardian). In 2024, Kamala Harris appeared underprepared, with limited time to mount an effective campaign. Moreover, the Democratic Party lacked a robust “Plan B” following Biden’s withdrawal—an issue that might also have plagued Republicans had circumstances differed.
Voter Engagement Decline
Comparing 2024 to the 2020 election reveals significant shifts. In 2020, Joe Biden won with 306 electoral votes (81,283,501 popular votes), while Donald Trump secured 232 electoral votes (74,223,975 popular votes). Over eight years, Trump gained 3,042,826 votes (a 4% increase), while the Democratic candidate lost 6,302,188 votes (an 8% decline). Total voter turnout in 2024 was 3,259,362 votes lower (2% decrease) than in 2020, despite a 5,541,434 rise (1.6% increase) in the U.S. population. These trends indicate that Trump’s victory was driven less by voter shifts to the GOP and more by the Democrats’ failure to energize their base.
Victory Margins Were Slim
On a broader scale we must notice that the margin of Trump victory (+1.5% of popular votes) was the smallest since 1888, save for two elections: John F. Kennedy in 1960 (+0.17%) and Richard M. Nixon in 1968 (+0.7%), according to the calculation of The New York Times.
The state level is no different. Even in Texas, a Republican stronghold, Harris prevailed in major urban centers (El Paso, Dallas, Austin, San Antonio, Houston). At the Texas state level, Trump’s margin of victory—56% to Harris’s 43%—was far from overwhelming (AP News). Similarly, in Democratic bastions like New York and Washington, margins were modest: 56%-44% and 59%-39%, respectively. These figures highlight that the American electorate is less polarized than the media often portrays, with shifts driven by small but impactful voter movements.
Historical Perspective: The Myth of the “Wave”
Historical context underscores that more dramatic electoral shifts have occurred:
• In 1996, Democrat Bill Clinton won 379 electoral votes to Republican Bob Dole’s 159.
• In 1992, the same Democrat Bill Clinton won 370 electoral votes to George Bush Sr. 168.
• In 1988, Republican George H.W. Bush secured 426 electoral votes, leaving Democrat Michael Dukakis with 111.
• The most resounding post-war victory occurred in 1984, when Republican Ronald Reagan amassed 525 electoral votes, leaving Democrat Walter Mondale with just 13.
• Other notable landslides include Nixon’s 520-17 victory in 1972 and Lyndon B. Johnson’s 486-52 win in 1964.
Therefore, concerns about the future of the United States appear to be overstated. Despite the significant Republican advantage in the 2024 elections, the likelihood of a political collapse remains low. There was no catastrophe or power usurpation in 1964 under a Democratic president with a Democratic Senate and House of Representatives, nor in 2000 under a Republican president with a Republican-controlled Senate and House of Representatives.
Conclusion
We anticipate that the Democratic Party will learn valuable lessons from the 2024 campaign and enter the next electoral cycle better prepared. The Democratic Party faces a pivotal moment to rebuild its base by addressing voter engagement challenges and presenting more compelling leadership. A stronger focus on economic policy and grassroots mobilization could be key to regaining momentum.
At the same time, many of the Republican Party’s stated goals are more favorable for markets and the American economy compared to the Democratic agenda.
The resilience of the U.S. economy stems from its stakeholders’ and political parties’ ability to negotiate and reach compromises. We believe this collaborative spirit will continue to prevail moving forward.
Republican dominance in both chambers of Congress may lead to significant tax reforms, focusing on corporate tax cuts and deregulation in industries such as energy and finance. While Republican policies may benefit growth-oriented sectors, potential cuts in social spending and increased protectionism could create headwinds for consumer-driven and export-focused industries.
Also, potential trade tensions with key partners, reminiscent of Trump’s first term, could weigh on global markets. The return of Donald Trump may revive uncertainties in international relations, particularly with China. Markets are already factoring in the possibility of new tariffs or stricter trade agreements, which could disrupt global supply chains.