US Election's Effect on Equity Markets and Rates

The aftermath of the recent US elections is poised to significantly influence market dynamics, particularly with bond yields expected to guide equity movements. Analysts from JPMorgan and Morgan Stanley anticipate that a Republican win, led by Donald Trump, could lead to a favorable environment for cyclical stocks if Treasury yields remain stable amid economic growth expectations. Meanwhile, rising bond yields have been linked to the 'Trump trade,' with speculation that inflation pressures may lead the Federal Reserve to pause rate hikes in December. Despite the potential for a contentious electoral outcome reminiscent of the Bush-Gore scenario, the stock market remains optimistic, having reached new highs in October on strong economic performance, including a 2.8% growth rate in Q3. In Australia, the consensus on interest rate cuts has shifted to a later timeline, with expectations now pushed to 2026 amid ongoing inflationary concerns. The economic landscape remains complex as individuals and institutions navigate potential fiscal adjustments in response to election results and broader market forces.