Crypto and stocks brace for election volatility as Trump gains momentum
With Election Day on November 5 rapidly approaching, the United States is preparing for the inauguration of a new president, with Donald Trump and Kamala Harris locked in a tight race for the White House.
Polls show a razor-thin margin, especially in key states, with both candidates showing nearly identical chances of victory, reminiscent of the 2020 election in which Donald Trump narrowly lost to Joe Biden. But this year, the financial markets suggest a favorite. The Trump stock boosted by over 100% this month is a clear evidence.
The world’s largest predictive market platform, Polymarket, currently gives Trump a 60% probability of winning. The platform has seen massive engagement, with over $2 billion traded in anticipation of Election Day. But how reliable is this prediction? Not entirely. Although Polymarket has grown significantly, it still lacks the scale to prevent large individual bets — often tens of millions of dollars — from heavily influencing market outcomes. Known as “whales,” these large bets can sway, influence, or even manipulate the market.
Nonetheless, if market sentiment is leaning toward Trump as the likely victor, opportunities could arise to profit from financial instruments that stand to gain from his policy promises or to avoid markets that may be vulnerable to downside risk.
Crypto surge with Trump’s endorsement
Several months ago, Trump expressed support for the crypto sector, with Elon Musk publicly aligning with the Republican cause. Since then, there has been a noticeable correlation between Trump’s polling gains and the price of Bitcoin. As shown in the chart below, Bitcoin has seen a significant rally over the past two months, almost reaching previous highs as Trump’s position has strengthened against Harris in the polls. Should Trump secure a victory, we could see further gains in Bitcoin.
Equity markets and election volatility
The stock market, however, tells a different story. Historically, the days leading up to a presidential election are marked by considerable volatility and market dips, as we’re currently seeing. Yet, following the election, the market typically regains upward momentum. With this in mind, it may be prudent to look for an entry point into the U.S. stock market before the new president is elected, staying mindful of the typical election-related volatility, with the aim of capturing a potential post-election rally. If Trump wins, the market expects a more favorable environment for equities, while a Harris victory could see bonds outperform stocks.
Potential setbacks for European equities
Conversely, Trump’s proposed trade tariffs could place European equity markets at a disadvantage should he win, while a Harris victory might provide a short-term boost to European markets, which currently lag behind their global counterparts.
With the U.S. poised for significant political and economic change, all eyes are on the markets—and the strategies investors will adopt in response to the country’s choice on November 5.
