Asian Stocks to Echo US Gains as Vote Count Nears: Markets Wrap

Asian stocks were set for a higher open following election-day gains in the US, as traders hunkered down awaiting results in a presidential race pitting divergent visions of global trade and the economy. Gauges of expected volatility crept up amid hedging by investors before an outcome that remained too close for pollsters to call.

(Bloomberg) — Asian stocks were set for a higher open following election-day gains in the US, as traders hunkered down awaiting results in a presidential race pitting divergent visions of global trade and the economy. Gauges of expected volatility crept up amid hedging by investors before an outcome that remained too close for pollsters to call.

Equity futures rose in Japan and Australia, while contracts on the S&P 500 edged up 0.1% to 5,820. That was after the measure climbed 1.2% in regular trading, led by its most-influential group: technology. Trading is expected to be volatile overnight as election results come in, with polls showing Republican Donald Trump in a virtual tie with Democrat Kamala Harris. With the outcome hinging on just a handful of states, it is possible a winner won’t be declared until Wednesday at the earliest.

While it’s anyone’s guess how long it will take to get clear results for both the presidency and the makeup of Congress, markets showed signs of last-minute positioning. Investors boosted bullish options positions in Treasuries, potentially paring back bets a Donald Trump win would push up interest rates, while a volatility gauge tied to single-day options on the S&P 500 doubled on Tuesday. A handful of banks told clients their derivatives trading desks will be open as returns come in, according to people familiar with the matter.

Read: Here Are the Asian Stocks to Watch as US Election Votes Tallied

In contrast to Tuesday’s relatively calm session, Wall Street saw the potential for outsized moves almost regardless of the election’s outcome.

A note from Goldman Sachs Group Inc.’s trading desk said a Republican sweep may push the S&P 500 up by 3%, while a decline of the same size is possible should the Democrats win both the presidency and Congress. Moves would be half as much in the event of a divided government. Andrew Tyler at JPMorgan Securities said anything other than a Democratic sweep is likely to cause stocks to rise.

The call for a year-end rally has history on its side, as it tends to be a seasonally strong period for US stocks. 

To Morgan Stanley’s Mike Wilson, the election could serve as a “clearing event” that kicks off a year-end rush into stocks. At JPMorgan Chase & Co., Dubravko Lakos-Bujas says the setup for equities looks solid through December once the presidential race is called. He expects confidence to grow and volatility to decrease, leading investors to unwind hedges and refocus on the Fed at a time when the economy and corporate earnings remain resilient, a combination that will drive further gains.

Here’s What Wall Street Says:

• Mark Haefele at UBS Global Wealth Management:

While some equity market volatility this week is inevitable, we do not expect the likeliest election outcomes to change our 12-month view on US equities. We expect the S&P 500 to rise to 6,600 by the end of 2025, driven by our expectations of benign US growth, lower interest rates, and the continued structural tailwind from AI. We expect these market drivers to remain in place regardless of who wins the US election. 

Our 10-year yield forecast is 3.5% for June 2025. While we would expect yields to land somewhat higher than 3.5% under a Trump presidency, we would still anticipate positive returns for bonds over the coming twelve months. We do not expect the election result to shift the Fed from a path toward lower interest rates, and inflation remains on a downward trajectory.

We would expect the dollar to be somewhat stronger under Trump than Harris. More pro-growth policies, likely higher interest rates, and tariffs could all provide tailwinds for the dollar. Nonetheless, from today’s levels we would expect dollar depreciation regardless of the victor.

• Jose Torres at Interactive Brokers:

Irrespective of who wins the presidency, strong seasonals favor stocks from now to year-end, especially since a blue sweep is not in the cards. The most likely scenario is a mixed Washington, with leaders on both sides of the aisle needing to compromise to get things done. But a red sweep is still possible, which will help equities via pro-growth policies that likely incorporate aggressive onshoring ambitions, lower corporate taxes and a subdued regulatory landscape. In conclusion, however, bond yields are critical to watch, as investors and traders alike examine the inflationary, deficit and activity impacts of incoming policies.  

• Jeffrey Buchbinder at LPL Financial:

The history of stock market performance around elections suggests investors shouldn’t expect much from stocks over the next month.

On average, the index has traded down marginally in the month after the election and only finished higher about half the time. Given the lack of volatility around policy implications from the election this time, and the strong year-to-date gains, we would put the odds of some weakness over the next few weeks as higher. Three and six months out, the story is a bit better, with gains coming about two-thirds of the time with average gains of about 2% per quarter. 

Looking out longer term, the index has generated an average gain of 6.5% one year after elections, though with gains only slightly more likely than losses. Given high stock valuations, the potential for the economy to slow (but land softly), and the possibility of tax increases in 2026, we think double-digit returns in 2025 might be difficult to achieve.

• Lori Calvasina at RBC Capital Markets:

Our historical playbook analysis reminds us that the S&P 500 tends to rise regardless of the balance of power in Washington. The strongest backdrops have tended to be a Democratic Presidency with a split or Republican Congress, and Republicans controlling the White House along with both chambers of Congress. In this context, we are more focused on longer-term opportunities that may open up from big gaps up or down around the event rather than short-term trades.

• Win Thin and Elias Haddad at Brown Brothers Harriman & Co.:

Regardless of the outcome, we believe the dollar will continue gaining. 

If Trump wins, we expect USD and Treasury yields to rise as fiscal and trade policies under a Trump presidency would be inflationary. This could force the Fed to keep the policy rate restrictive for longer. However, Trump’s ambiguous currency policy is a USD headwind. If Harris wins, we expect USD and Treasury yields to have a kneejerk drop before staging a recovery that’s underpinned by the strong U.S. economy.  Fiscal and trade policies under a Harris presidency are less likely to complicate the Fed’s price stability mandate and this has neutral implications for USD and Treasury yields.

We also may not know the makeup of Congress immediately  Democrats have greater odds of winning a majority in the House of Representatives and Republicans are favored to win the Senate.  As such, a divided Congress is the most likely scenario in our view. The political gridlock will make it hard for the next president to implement major fiscal changes.

• Dave Lutz at JonesTrading:

Market will be fine with whoever wins, but it won’t be fine if we don’t have a winner announced this week.

• Fawad Razaqzada at City Index and FOREX.com:

Trump’s core policies on taxes, tariffs, and immigration are considered inflationary. This is why we have seen a big rise in Treasury yields and the US dollar until the start of this week.

The greenback could give back more gains, should Harris win.

Conversely, a Trump victory could spell trouble for the yuan, euro, Canadian dollar and Mexican peso, among other currencies. The threat of universal tariffs could hit other risk assets too.

• James Demmert at Main Street Research:

Investors should look past the election and focus on the fundamentals of what drives markets. The economy and earnings continue to be better than expected, most stocks are reasonably priced and the Fed is in an accommodative mode and is expected to cut interest rates again this week. There is an excellent backdrop for stocks right now.

Our message to investors is to buy the chop and weakness that is being driven by election uncertainty and to remain fully invested as the market melts up in a Santa Claus rally, which we believe will last through year-end, pushing the S&P 500 to 6,150.

We see opportunities in tech, telecom, financials, industrials, utilities and energy.

We expect the Fed to lower rates by 25 basis points on Thursday, citing mixed economic data, and some weakening in the labor market. An accommodative Fed, slowing inflation and strong earnings is a classic “Goldilocks” economy and a great setup for stocks.

• Ryan Detrick at Carson Group:

The election is finally here and emotions are running high. Elections matter, but let’s not forget that an economy that continues to surprise to the upside, record earnings, and a dovish Fed likely matters more for this bull market than who is in the White House.

Things are close, we know that. But we also know this year will be the thirteenth year in a row that saw the S&P 500 close higher amid a split Congress. Gridlock can be a good thing and should we see this once again, this could be what investors should be rooting for.

• Jeff Schulze at ClearBridge Investments:

The outcome of the presidential and congressional elections will determine government policy across four key areas that influence the economy and equity markets: taxes, regulation, trade and fiscal spending.

We view a Trump win, likely coming in a sweep scenario, as net positive for equities as it preserves favorable corporate tax treatment and builds on tax elements that expired. A Harris win, likely coming with a divided Congress, would be mildly negative due to fewer provisions of expiring tax legislation getting extended due to political gridlock.

While investors may react to every sound bite from the presidential candidates, creating elevated volatility through election day, the trajectory of the economy is the most important driver for equity markets over the long term. With the Fed cutting rates, that trajectory should accelerate from here.

• Ken Mahoney at Mahoney Asset Management:

First off, we would simply tell investors not to overreact.

We believe we are set for a strong end-of-year rally for many reasons, two of which are a possible chase scenario by the bears who finally have to capitulate, and performance anxiety from large money managers who may have missed the big moves in certain names. 

We do believe the market prefers Trump for lower taxes and less regulation, and with Kamala, we likely see higher taxes and more regulation, but again with the balance of power, we may not see many of their proposed policies go into effect.

Key events this week:

• Eurozone HCOB Services PMI, PPI, Wednesday
• China trade, forex reserves, Thursday
• UK BOE rate decision, Thursday
• US Fed rate decision, Thursday
• US University of Michigan consumer sentiment, Friday