Why Are Markets Still Uninterested in the US Presidential Election?

With U.S. President Joe Biden and former President Donald Trump confirmed as their parties' presidential candidates, the race toward the November election is heating up, but Wall Street is reportedly not paying much attention yet. The focus is more on what the Federal Reserve (Fed) will do rather than who will occupy the White House, and the stock market continues its rally.

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On the 13th (local time), financial media CNBC highlighted this market sentiment, citing factors such as a relatively stable economy and a divided Congress that makes it difficult to pass legislation regardless of who wins. Doug Roberts, founder of Channel Capital Research, said, "Gridlock is good," noting that "whichever side controls Congress, their power is too weak to accomplish much regardless of their promises."

In particular, this political deadlock is expected to support steady economic growth, a robust labor market, and a low inflation trend. The S&P 500 index, which focuses on large-cap stocks in the New York Stock Exchange, has already risen more than 8% this year. According to LPL Financial, the average increase in election years since 1952 has been 7%, but when the incumbent president runs, it was 12.2%.

Roberts said, "The economy is quite strong," and assessed that "there will be no major changes regardless of who wins the election." He explained, "Depending on the bills they announce, individual sectors may be affected, but essentially not much will happen. The market likes gridlock."

From a policy perspective, there are some differences between President Biden and former President Trump. For example, President Biden is driving green energy and electric vehicles, while former President Trump advocates "drill baby drill," a campaign slogan to increase oil drilling and provide tax breaks to related industries. Also, President Biden has declared tax increases on the wealthy, whereas former President Trump pushed for corporate tax cuts during his tenure. In terms of business, former President Trump preferred deregulation, while President Biden is promoting regulation.

However, despite these contrasting positions, CNBC's diagnosis is that the practical impact is not very clear. A representative example is that President Biden maintained the tariffs imposed during the Trump administration.

Regarding the market impact, the Fed holds significant power. CNBC stated, "The market barely reacts to the clashes between President Biden and former President Trump, but it can fluctuate wildly even with slight tremors related to the Fed." This year, political turmoil is expected to increase.

Joe Salmond, portfolio manager at Sonberg Investment Management, said, "As noise intensifies around the U.S. presidential election and the situation gains momentum, we will see investors' attention shift. Fed risks remain but are decreasing over time. Overall, the situation is calming down, so people's interest will wane." Jerome Powell, who currently leads the Fed, has a term ending in early 2026. The side that wins this election will also have the major task of nominating a new chair afterward.

This content was produced with the assistance of AI translation services.