Wall Street held its breath as a highly anticipated debate unfolded between Republican candidate Donald Trump and Democratic Vice President Kamala Harris late Tuesday night. Investors were hoping for clarity on critical policy issues, but the fiery discourse left many questions unanswered. Following the debate, betting markets indicated a favorable shift toward Harris, sparking speculation about how this might impact upcoming market trends.
The debate featured intense exchanges between Trump and Harris on an array of topics, including economic policy, immigration, and Trump’s ongoing legal challenges. Despite the combative nature of their discussions, many analysts noted that investors were left wanting more substantive insights into crucial areas such as tariffs, taxation, and regulation. Eric Beyrich, a portfolio manager with Sound Income Strategies in Westchester, New York, remarked, “Neither candidate articulated strong economic positions, but Harris’s performance seemed to resonate more positively than Trump’s, which could sway market sentiment in the coming days.”
Online prediction market PredictIt saw Harris’s odds improve to 56%, nudging up from 53% before the debate, while Trump’s odds dipped slightly from 52% to 48%. Despite this movement in prediction betting, the immediate reaction in financial markets remained subdued. As the debate unfolded, stock futures slipped, with S&P 500 E-minis down 0.5% and Nasdaq 100 E-minis declining by 0.6%. Meanwhile, the dollar index, a measure of the greenback’s strength against major currencies, fell by 0.2%.
Experts like Sonu Varghese, global macro strategist at Carson Group, suggested that while the debate might not drastically change voter opinions, the shift in prediction markets does add another layer to the closely contested race. “Voters are still very much divided, and this debate likely won’t alter perceptions dramatically,” he noted.
Although political debates are on the radar for many investors, immediate economic concerns have taken center stage. A faltering U.S. economy and speculation regarding the Federal Reserve’s interest rate policies have contributed to a cautious market environment. The S&P 500 recently recorded its worst weekly percentage loss since March 2023, largely attributed to disheartening jobs reports, although it remains up nearly 15% for the year.
Focusing on specific issues, Trump reiterated his commitment to lower corporate taxes and a more aggressive trade stance, while expressing a belief that a strong dollar may impede economic growth. Conversely, Harris proposed raising the corporate tax rate to 28% from the current 21%, a move that some analysts argue could negatively impact corporate profits if implemented.
During the debate, Harris criticized Trump’s tariff policies, arguing they would function like a sales tax detrimental to middle-class families. Trump defended his approach, asserting that his tariffs would not increase consumer prices. This exchange highlighted the candidates’ differing visions for U.S. economic policy, further unsettling investors.
The Chinese yuan, previously pressured during Trump’s time in office, gained slightly against the dollar as markets digested the debate outcomes. Karl Schamotta, chief market strategist at Corpay, indicated that Harris’s performance swayed the odds in her favor, leading to a mild improvement in overall risk sentiment across currency markets.
While both candidates addressed inflation, Trump condemned the current economic situation, asserting it has hurt all classes of Americans. However, experts suggest substantial economic policies may remain murky for the time being, largely depending on the composition of Congress following the elections.
Political analysts and investors alike are bracing themselves for uncertain times ahead, with both the presidential race and economic policies closely intertwined. The debate, while not a game-changer for markets thus far, could serve as a pivotal moment in shaping election odds and, ultimately, market stability as the nation moves closer to the 2024 elections.