Election Insights: Markets and Economic Trends

With just one week until the presidential election, economic indicators such as GDP are becoming crucial for predicting outcomes amid fluctuating polling data. Monica Guera, head of US policy at Morgan Stanley Wealth Management, discusses the correlation between GDP growth and election outcomes, noting a GDP reading of 2.8%. Historically, strong economic performance benefits incumbents, but current consumer sentiment is exceptionally low, reminiscent of findings from 1978. The analysis extends to sector performance, with Republican ETFs outperforming Democratic counterparts since March. This divided performance suggests that market participants are factoring in potential policy changes and deregulation. Guera emphasizes the need for buyers to be cautious, especially in a tight election environment, and to remain focused on long-term strategies rather than immediate trends. Furthermore, the evolving stance on defense shows how either party could influence military spending and geopolitical engagement. Investors are advised to consider tax policies coming in 2025 while navigating a politically charged market landscape, marking this election cycle as uniquely uncertain in terms of economic implications.