HSBC Indicates That These Four US Election Scenarios Are “Very Much on the Table”

With just weeks remaining before the crucial US presidential election on November 5, recent polling indicates a near tie between Kamala Harris and Donald Trump in key swing states. The latest survey reports that Harris, the Democratic candidate, holds a slight advantage in Arizona, Michigan, Wisconsin, and Georgia, while Trump, her Republican opponent, shows a narrow lead in Nevada, North Carolina, and Pennsylvania.

However, neither candidate has a significant margin over the other in these battleground states, as reported by the polling organization. This pattern of a tightly contested race has been confirmed by other recent surveys.

Analysts from HSBC are outlining four possible outcomes for the election, which not only affects the presidential race but also determines the composition of the US Congress. One scenario envisions Trump winning a second term while his party takes control of both the House and Senate. Alternatively, they predict a Trump victory without a complete Republican sweep of Congress.

The analysts present similar scenarios for Harris. She could secure the presidency while the Democrats gain control of Congress, or she could win in a divided legislature.

For the financial markets, a Republican majority in Congress could lead to expectations of a more aggressive stance from the Federal Reserve regarding interest rates. Conversely, a Congress controlled by Democrats might result in a bullish steepening of the yield curve.

The analysts noted that Republican policies could foster further outperformance in US equities, though heightened trade tensions might negatively affect the global economy. On the other hand, a Democratic sweep could lead to increased corporate taxes and stricter antitrust regulations, posing a potential challenge to US stocks.

It is important to consider that if Congress remains divided between Republicans and Democrats, both Trump and Harris might struggle to pass significant legislation. However, certain policy areas could still be influenced, especially those that don’t require new laws. Examples include tariffs, immigration, and regulation, which could impact growth, inflation, and interest rates as early as 2025.

For policy issues that necessitate new legislation, such as tax reforms and fiscal policy changes, it is expected that considerable time will be needed for debate and negotiation, irrespective of the election results.