The time for Americans to vote for a new president is getting closer, but who will win the election on November 5 seems less certain than Vice President Harris when he first ran for office. Although Harris still leads in most opinion polls, her lead has noticeably narrowed in the past 10 days, with a significant increase in voting intentions towards Trump.

Main policy differences

Since the last report, there hasn't been much change in the policy agenda of the two candidates. Trump proposed a comprehensive and substantial tax cut, while Harris prioritized low-income workers and small businesses. Harris' other economic suggestions include supporting first-time homebuyers and ending the price gouging of food and groceries.

Trump has no specific policies regarding the cost of living crisis, but has promised to "end inflation" and lower interest rates, which raises questions about the independence of the Federal Reserve during Trump's second term. But this could be a quite difficult challenge for Trump, as raising tariffs is a core element of his campaign.

On the issue of immigration, Trump promised to deport illegal immigrants on a large scale, forcing Harris to take a tough stance and crack down on asylum applications. In terms of foreign policy, Harris and Biden are almost no different, while Trump believes he can quickly reach an agreement through negotiations to end the wars in Ukraine and the Middle East, marking a return to his isolationist stance.

Abortion and climate change are also on the list

Climate change and abortion are other hot topics worth noting in the 2024 election campaign. Abortion may be Trump's weakest point, potentially causing him to lose a large number of votes, but for Harris, who staunchly defends abortion rights, it is a winning point.

On energy issues, Trump hopes to encourage more oil and gas drilling and question the scientific evidence of climate change. However, although Harris fully supports renewable energy, she has abandoned her opposition to hydraulic fracturing and no longer supports authorization for electric vehicles.

Who controls Congress is important

In summary, both candidates' policies are quite ambiguous, even in terms of taxation. For example, Trump's proposal to lower the corporate tax rate to 15% may only apply to companies that produce products in the United States, while Harris hopes to extend the 2017 tax cuts, which expire in 2025, to only apply to companies with incomes below $400000.

But the biggest uncertainty is that whether these policies can ultimately be passed in Congress will depend on the composition of both houses of Congress and the financial situation of the United States. For the financial market, this will be a more important outcome.

The market prefers a split in Congress

For investors, a split in Congress with either Trump or Harris as president is seen as the safest outcome, as Republicans are almost certain to control the Harris administration's uncontrolled spending, while Democrats are unlikely to support Trump 2.0's underfunded tax cuts.

However, if the Republican Party gains control of both houses of Congress, Trump will be able to easily push through his proposed tax cuts while cutting spending. However, the plan to cut spending will not match the scale of tax cuts, leading to a worrying increase in the budget deficit in the United States, where the continuously increasing debt level has exceeded 120% of its GDP.

On the other hand, the Democratic Party's' blue sweep 'is the least likely outcome. Therefore, Kamala Harris' plan to increase corporate and capital gains taxes has little hope of being passed, as Republicans will never support these plans.

The inflation risk brought by Trump's administration

However, on the whole, investors' enthusiasm for Republicans is not as strong as that of Trump when he was elected president in the previous two elections. The main reason is that they are worried about US debt and inflation. Trump's recent recovery in opinion polls has triggered a sell-off of US and global bonds, as people expect his high tariffs and low tax policies to trigger inflation while increasing government borrowing.

As the yield of US treasury bond bonds subsequently soared, the US dollar began to strengthen even before Trump took office. During Trump's presidency, the long-term outlook for the US dollar has also been bullish, although it may become more volatile, especially as investors deal with the results after the election.

The Democratic Party's boost to the US dollar and stock market is not significant

However, if Harris wins, the initial market reaction may be a reversal of the recent uptrend of the US dollar. Its long-term prospects will not be as optimistic as Trump's election as president, although they may not be as pessimistic as some predictions suggest. If Harris can successfully pass most of her suggestions to help low - and middle-income earners, the boost to consumption and the resulting boost to the economy will not be much different from the boost from tax cuts.

Venture assets will also benefit more from the Trump and Republican controlled Congress than the Harris administration, although the situation is not as clear. Wall Street will generally benefit from the reduction of corporate tax rates and the decrease in regulation. But if tax cuts exacerbate inflationary pressures and tariff increases (not just for Chinese imports, but for all imports) make the situation worse, then if rising prices prevent the Federal Reserve from cutting interest rates, the stock market will find it difficult to rebound.

The energy industry under the spotlight

However, with the stock market bearish, industries such as energy and defense may continue to perform well.

If Harris takes over the White House, green energy stocks may perform better than oil and gas stocks, although technology stocks may also benefit from increased regulatory efforts. In addition, due to the relatively low threat of inflation and uncontrolled lending, the Fed's interest rate cuts under Democratic leadership will generally boost the stock market, and Harris is more predictable than Trump, which may also be more favorable for Wall Street.

The prospects for bulk commodities are mixed

For commodities, there is also no clear outcome. The strengthening of the US dollar under Trump's leadership may put pressure on gold, but the political uncertainty he brings will certainly stimulate safe haven demand. If Harris wins, the bullish trend of gold will be more certain.

At the same time, if Trump cuts taxes, oil may gain greater demand from a potentially stronger economy, but the expectation of greater supply from more drilling may offset some of the gains. However, people are somewhat confused about how far Harris will go in opposing new fossil fuel projects, and in fact, Biden's policies may not change much.

Swinging states hold the key

As election day approaches, people are paying increasing attention to swing states, which seem to determine who will take over the Oval Office. These seven swing states are Arizona, Georgia, Pennsylvania, Michigan, North Carolina, Nevada, and Wisconsin.

Most polls show that Trump seems to have an advantage in Arizona and North Carolina, while Harris leads in Nevada and Wisconsin. Interestingly, Harris' ability to raise funds far exceeded her donations to Trump, but in the final days of the campaign, it didn't seem to have helped her much. The gambling market and many investors believe that Trump has a greater chance of winning.

Will Trump question the election results?

But opinion polls are changing every day, making it one of the most intense competitions in history, and if Harris wins by a narrow margin, the Trump team may question the results. This is the worst-case scenario for the market, which could last for weeks or even months, bringing political uncertainty to the United States as global geopolitical tensions intensify.