​There is no doubt that the US election has had a significant impact on market performance since last week. President-elect Trump achieved a decisive victory, including a win in the popular vote. Furthermore, the Republican Party also secured victories in both the House of Representatives and the Senate. This should facilitate the implementation of the majority of the planned changes. Following the confirmation of Trump as the winner, equities began to rally. While there was already a change in equity sentiment following the first rate cut by the Fed, confidence continued to grow when Trump emerged victorious. The conclusion of the US election in a relatively smooth process undoubtedly had a part to play. This has led to a reduction in uncertainty in global markets. The second significant factor is the election of Trump as President. Investors are confident that the new administration will make financial markets a priority, as was the case in his first term. As a result, the S&P 500 reached a new record high of 6,000 points for the first time. The Nasdaq reached a new milestone, surpassing the 19,000 mark for the first time. In the commodities market, this had the opposite effect. Gold, a traditional asset used to manage uncertainty, saw a decline from its previous highs. In the context of a bullish market sentiment, gold is perceived as a less attractive investment. Investors are inclined to hold risk-on assets with higher potential returns, as opposed to gold, which is used to mitigate risk. The price of gold fell from $2,700 to $2,550 over the past week. Crude oil initially gained, but soon began to decline. The Republican agenda supports fossil fuels and is likely to push the industry forward. This is likely to result in more supply and overall lower prices. WTI crude oil declined from $71 per barrel to $68. Lastly, the big winner from the US election result is the cryptocurrency market. Trump's campaign trail agenda was notably pro-crypto, with a particular emphasis on the potential for the US government to establish a Bitcoin reserve. It should also result in a clear regulation of cryptocurrencies during his tenure. This prospect prompted a surge in Bitcoin’s price, reaching a new record high of $93k. The subsequent 45% rally in slightly more than a week triggered another bull run in the cryptocurrency market, with Ethereum not far behind with gains of 38% in a single week. Figure 1 illustrates the price development since October 2024 and the impact of Trump as US President Elect.

​With less than a week to go, the US election is fast approaching. The decision is likely to have a major impact on the world and financial markets. Both candidates are drumming up support wherever they can. With less than a week to go, no candidate has emerged as the clear winner. Instead, the race is very close and will be decided by the swing states, where the candidates are also very close. Interestingly, current Vice President Harris is leading the national polls, while ex-President Trump is leading the betting sites. Trump has also managed to regain a lot of ground after it looked like he was going to lose badly to Harris shortly after she entered the race. Although there is no clear winner yet, the race is currently boosting financial markets.
In particular, equities have resumed their rally after a weak summer and are back at record highs. Other factors, such as the hype around AI and strong earnings, particularly from technology companies, strongly supported the rally. More recently, the Fed's larger-than-expected rate cut has been a major contributor to the strong year for equities. On average, US election years also tend to be positive for equities. The technology-heavy S&P 500 and Nasdaq indices both rose by more than 20% for the year. The Dow Jones was up 15%, but has fallen back slightly and is currently up 12%. Small caps have struggled in the early part of the year, unable to match the gains of large caps. Nevertheless, the Russell 2000 Index is also up 10% before the latest surge. Figure 1 shows a comparison of the above indices through 2024.

​After a difficult summer for equities, the months of September and October were generous to the global markets. US equities in particular have performed remarkably well. The biggest catalyst for these recent strong gains is the Fed's 50bps rate cut in September. The general view has also changed and further cuts, even large ones, are on the table and large rate cuts may be necessary. This has catapulted equity indices higher. The S&P 500 and Dow Jones Industrial Average continue to hit new highs on an almost daily basis. The S&P 500 surpassed 5,800 for the first time and nearly reached 5,900 in recent days. Similarly, the Dow Jones Industrial Average reached a new milestone by surpassing the 43,000 mark. Only the Nasdaq Composite has slightly missed its previous record high during these two months. However, the index is also very close to new record highs. Figure 1 shows the performance of the three indices throughout 2024. The Nasdaq Composite Index and the S&P 500 Index are both up nearly 25%, while the Dow Jones Industrial Average is up nearly 15%.

​It has finally happened. The Fed cut rates for the first time since the unprecedented hikes began in 2022. Throughout 2024, hikes were expected at almost every meeting and investors were consistently disappointed. Initially, falling inflation was the main driver of these expectations. Once inflation fell below 4%, there was little further decline. Traders argued that inflation had come down significantly and was likely to continue to do so even with lower interest rates due to the usually lagged effects of central bank measures. Instead, the central bank moved much more cautiously and wanted to monitor inflation developments. At one point, inflation proved to be sticky and did not fall much below 3%. Occasional fears of recession reappeared, offset by a strong labour market. These recession fears began to rise as soon as the labour market started to weaken. In recent months, the focus has shifted away from inflation. Instead, the focus has been entirely on employment data. This culminated in the run-up to the September meeting, when a first rate cut was almost inevitable for the hesitant Fed. Given this caution, most market participants were expecting a 25bps cut, with a few predicting a 50bps cut. Surprisingly, the Fed did indeed cut by 50bps to 4.75%, with comments on further cuts in its two remaining decisions this year. Expectations for the federal funds rate at the end of 2024 now range from 4% to 4.25%. Figure 1 shows this in more detail. The Bank of England has also cut rates only once this year, in August, while the European Central Bank has already cut twice. Switzerland stands out, as its central bank has cut interest rates three times in 2024, with the first cut already in March 2024.  Figure 2 shows the respective interest rates from January 2023 to September 2024.