US Elections and the Markets - YES SECURITIES

Mr. Hitesh Jain, Lead Analyst - Institutional Equities, YES SECURITIES

"The deadlock over US stimulus package will also dominate eyeballs, however, we think that Democrats and Republicans will eventually ink a deal given the rising labour retrenchment and risks to the consumer spending. On US dollar, we see greenback losing ground against the basket of currencies as President Trump returns to the White House and expectations of stimulus negotiations materialize into a deal.

After US Elections

There is also a strong chance that Democrats have a majority in Senate, which implies higher fiscal spending. In terms of connotation for the markets, we should brace for a transient sell-off in US equities and fall in US dollar, Ergo, Gold could rally higher, helped by a tumbling US dollar and concerns of higher fiscal spending and potentially rising inflation. Needless to mention, Fed will remain tolerant of the same, with the central bank recently articulating that it will stand pat on interest rates for the next three years. In case of Biden as the next US President, Base metal prices should move higher as US/Chinese relationship will stabilize and markets start pricing in a probable trade deal.

On the contrary, If Trump reclaims Presidency and Republicans maintain majority in the US Senate, we could have an ensuing stock market rally and stronger US dollar, as investors will be pleased with the fact that US corporate taxes will remain low. On the commodity front, Trump victory will translate into weaker tone in precious and base metals, with non-ferrous complex being the most vulnerable, hauled lower by prospect of heightened trade tensions with China.

In case of a mixed equation, where Mr. Biden turns out to be the next US President, while Senate is controlled by Republicans. Markets will construe this sort of power sharing as an impasse on various reforms and nothing dramatic will be seen in the next four years."

Source : Equity Bulls

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