The much-anticipated results of the 2024 U.S. presidential election are set to be revealed this week. Starting from late September, market expectations leaned strongly towards a Trump victory. However, recent shifts have narrowed Trump’s lead, leading to a reversal in “Trump trades” and creating a more competitive race.

Trump Still Leading, But the Gap Narrows

Trump maintains a lead in key swing states. As of November 1, national polls show Trump with 48.4% support, leading Harris by about 0.3 percentage points. For comparison, during the same period in the 2016 and 2020 elections, Trump was trailing Clinton and Biden by 7.8 and 1.5 points, respectively. In swing states, while Trump still leads, the margin has slightly decreased compared to a week ago, with Harris taking the lead in Michigan and Wisconsin. Based on current polls, if electoral votes were allocated strictly according to these standings, Trump would secure 287 votes and Harris 251 votes (with 270 needed to win).

source：RCP

According to data from RealClearPolitics (RCP), betting markets, which often react faster to changes, show a recent decline in Trump’s advantage. As of November 2, Trump’s betting odds stand at 54.7% against Harris’s 44.1%, a notable drop from 63.9% at the end of October.

source：RCP

Chart: Early Voting by Party in Each State

source：CNBC

What Happened Before the Election Day?

October Job Growth Falls Short: Only 12,000 jobs were added in October, far below the projected 100,000, marking the lowest job growth since December 2020. However, the Bureau of Labor Statistics noted that October's job figures were impacted by hurricanes and the Boeing strike.

Global Stock Markets React: On Friday, U.S. stocks rose despite the disappointing jobs report. The Dow Jones gained 0.69%, the S&P 500 rose 0.41%, and the Nasdaq climbed 0.8%. In Asia, stocks opened higher on Monday as investors turned their attention to the U.S. election, the Federal Reserve’s upcoming policy meeting, and China’s National People’s Congress meeting.

China’s Stimulus Plan Tied to U.S. Election Outcome: Investors expect China to announce fiscal support measures following the National People’s Congress meeting. Nomura’s chief China economist predicts a Trump victory could prompt China to increase stimulus spending by 10-20% compared to a Harris victory.

Harris Gains in Iowa: While many polls previously predicted a weak showing for Harris in Iowa, a recent poll by the Des Moines Register and Mediacom shows Harris with a 47% to 44% lead over Trump among likely voters, a 7-point gain since September. Iowa holds six electoral votes.

Congressional Composition May Shape Stock Market Performance

While much of the focus remains on the presidential race, the makeup of Congress will also be critical. Whether Congress remains divided or united could play a key role in determining future stock market trends.

Intense Congressional Races

The U.S. Congress elections are highly competitive. The Associated Press reports that both major parties are battling fiercely for control of the House and Senate. While both parties have a shot at gaining control of the House, no party has a clear advantage. Senate races, where one-third of seats are up for grabs, have candidates going all out in a final effort to secure voter support.

Reuters notes that at least 75 million Americans have already cast their ballots, close to half the total of 160 million votes in the 2020 election. However, even after voting closes on Tuesday, the final results may take days to confirm, especially in closely contested states like Pennsylvania where mail-in ballots could delay a clear outcome.

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