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Trump Conviction: Does It Matter to the Markets?

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Trump Conviction: Does It Matter to the Markets?
Elections are important to markets, because whoever is in the White House has a lot of influence over regulations and other matters that affect the economy, stock market and monetary policy. Naturally, the markets would be paying attention to the major events in each electoral cycle campaign.

The most dramatic election is in the US, at least for now, with all the headlines blaring about the “historic” and “unprecedented” results of presumptive Republican candidate Donald Trump conviction yesterday. But, the market’s reaction has been, well, not much at all. Politics aside, what the market cares about his how it could potentially affect the election, and what kind of economy-affecting policies will come after that.

It’s All Baked Into the Cake

Prior to the Trump Conviction yesterday, a poll conducted by PBS, NPR and Marist was released showing that the results of the trial would have hardly any overall change in the vote. 67% of voters said that results of the trial would have no effect on their vote. Interestingly, a higher number of independents (74%) said it would not affect how they voted. Which might be an indication that pretty much everyone has already made up their mind, given how widely known both candidates are.

The split between those who said that the result of the trial would affect their vote is pretty even. 15% said they would be more likely to vote for Trump, while 17% said they would be less likely. The difference was well within the margin of error, meaning that the likely outcome of the trial will only be seen in the margins.

New Polling, But No New Shifts

Naturally, in the coming week post the election, there will likely be a host of new polls about the race being released in order to capture the change in mood. But the market is likely to ignore those just as well, since they capture only a brief snapshot and there are still several months before the election. In the meantime, a lot can happen, from other trials against Trump, a trial against President Biden’s son, and the sentencing hearing on July 11 to see whether Trump will be in jail or not come election day.

The markets, in the meantime, are likely to be concerned with more pressing issues, such as the upcoming expected interest rate cut, the signs of a revitalization in the economy, and what happens with inflation. All of that will have a much bigger impact on the markets as a whole, and the dollar in particular. The political fallout did not budge Treasury yields, which is the key underlying factor that determines how strong the dollar will likely be in the coming days and weeks.

What Happens Long Term?

Whoever wins the election, however, is expected to have an important impact on the markets. Trump has vowed to replace Fed Chair Jerome Powell, for example, while presumably Biden would confirm him in office for another term. Therefore, a major deviation in the polls could get the attention of the markets, which would react accordingly.

Barring some major change in the candidates’ position, however, the markets are likely to ignore the political drama. If the Fed goes through with its expected rate hike in September, there is plenty of time for the markets to adjust for the potential outcome of the elections in November.

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