Market Volatility: Stocks and Gold in Election Limbo

The U.S. presidential election on Nov. 5 is proving to be anything but predictable. Polls indicate a tight race for the White House and potential for either party to control the House, while Republicans hold a slight advantage in the Senate, according to UBS Group’s latest ElectionWatch analysis.

With the potential for varied outcomes—even a contested election akin to the 2000 Bush-Gore standoff—investors should be prepared for market volatility. While stocks have historically risen regardless of which party leads Washington, Jay Hatfield, portfolio manager at Infrastructure Capital, believes this election could have an outsized impact on markets.

“This isn’t your garden-variety election,” Hatfield told MarketWatch. “The market implications could be huge, with each party backing starkly different policies.”

Market Implications by Sector

Stocks

With days left before the election, the stock market is showing mixed signals. Investors are more focused on corporate earnings and economic data than on the election itself, but uncertainties around delayed results could still affect risk sentiment.

Key Sectors

Policy differences could directly influence certain sectors. For instance, a Trump victory might favor traditional energy stocks as he pushes for more U.S. oil production. Conversely, a Harris administration could boost renewable energy industries, with potential for stronger support for clean energy initiatives.

Bonds

Election results could trigger further moves in bond yields, particularly if government spending policies heighten deficit concerns. Rising yields could also influence stock market volatility.

Oil

With the U.S. election looming, oil prices are sensitive to both the candidates’ energy policies and Middle East developments. Trump’s focus on expanding U.S. oil production may keep prices in check, while Harris’s emphasis on green energy could push oil prices up as supply tightens.

Gold and the U.S. Dollar

Gold has hit record highs in recent months as investors hedge against political uncertainty. Meanwhile, the U.S. dollar has gained ground pre-election, with potential Trump policies fueling optimism among traders.

Investors will be watching closely for how these areas react to the final election outcome and any policy shifts that follow.