Implications of the 2024 US Election — Macro, FX, Private Markets and Crypto

As we approach the 2024 US Presidential election, the stakes have never been higher, with potential outcomes that could significantly shape the economic landscape. With President Joe Biden stepping aside, Vice President Kamala Harris has emerged as the Democratic frontrunner, facing off against former President Donald Trump, who has regained traction in the polls.

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This intense electoral backdrop raises questions about the implications for macroeconomic policy and various asset classes, particularly in the realms most relevant to Aura Group, i.e., private assets, alternative investments and the burgeoning cryptocurrency market.

Macro Implications

Economic Growth

A Republican sweep could signal a return to aggressive tax cuts and deregulation aimed at stimulating economic growth. Initiatives such as the reduction of corporate tax rates and high tariffs in the USA could bring some likely advantages like short-term boosts in domestic manufacturing and employment growth. However, this might invite foreign retaliation and also elevate national debt levels, as the long-term benefits of such tax cuts are often contingent on sustained economic growth.¹

Conversely, a Democratic victory under Harris would likely continue the current administration's focus on expanding social programs. While aimed at boosting economic participation and supporting low- and middle-income families, this fiscal approach may lead to a more moderate increase in national debt but could also support long-term economic stability.

Equities

In the event of a Republican sweep, sectors sensitive to tax cuts—like energy, transportation, and financial services—may see immediate benefits from reduced tax burdens and less regulation. However, the potential for increased tariffs could create volatility and complexity, particularly for companies reliant on global supply chains.

On the flip side, a Democratic sweep is expected to maintain a steady course, enhancing existing policies such as the Affordable Care Act and initiatives in clean energy. The equity markets could reflect confidence in continuity and the potential for steady growth in key sectors.

FX

The foreign exchange market is poised for significant shifts depending on the election outcome. In a Republican sweep, the USD may experience short-term strength as fiscal spending and tariffs are expected to reignite inflation and maintain higher interest rates. This would likely place downward pressure on the SGD and AUD vs USD.

Furthermore, if protectionist measures are enacted that target China, one of Australia's largest trading partners, it could lead to economic headwinds for Australia. Any slowdown in Chinese demand for Australian exports could weigh negatively on the AUD.

On the other hand, a Democratic victory might lead to a more stable USD, especially if Harris respects the Fed's autonomy and prioritizes a gradual approach to interest rate adjustments. For the AUD, a Democratic administration's focus on global trade could enhance Australia's economic prospects, particularly if it maintains strong ties with Asia. The SGD may also benefit as Singapore's economy is closely tied to US-China relations, with a more diplomatic approach potentially fostering trade growth.

Private Assets and Alternative Investments

The outcome of the election will also have profound implications for private assets and alternative investments. A Republican administration may favour private equity and venture capital by enhancing tax incentives for investment, potentially leading to increased capital inflows into these sectors. However, the associated risks of economic nationalism and trade tensions could dampen returns, particularly for international ventures.

A Democratic victory could bolster investment in sustainable and socially responsible assets, reflecting the party's focus on green initiatives. With greater emphasis on long-term infrastructure projects, alternative investments linked to renewable energy and technology may gain traction.

Cryptocurrency Markets

The 2024 election outcome will also be crucial for the cryptocurrency markets.

A Republican sweep could pave the way for a more lenient regulatory environment, potentially encouraging innovation and adoption in the crypto space. Trump’s family has even launched its own crypto project named World Liberty Financial² described as a “crypto banking platform”.

A Democratic administration is generally viewed as anti-crypto given regulatory action under Biden and vetoed legislation. Harris has also not announced any campaign policies.³

Conclusion

As we approach the 2024 elections, the impact on the country's economic policy and different asset classes is substantial. Be it a Republican or Democratic victory, the investors should be flexible and vigilant. Sailing through these uncertainties cautiously will be required as we try to anticipate developments in private assets, alternative investments, FX trends, and the evolving cryptocurrency landscape.