As election day proceeds, markets are eyeing a Trump win / Republican sweep as a “base case”, albeit with under 40% probability, and Trump at better than 50% to win the election. In US rates, multiple moves since mid-September appear to reflect the policy risks stemming from this outcome: steeper yield curve, pricing out of Fed cuts, higher real yields and inflation breakevens, and higher term premia.
- Here is the MNI Politics Team's scenario matrix as of last week, ascribing probabilities to each of the 8 possible outcomes. We note that while betting markets have actually been moving toward our prognosis since we published it, we still ascribe a higher probability of Harris winning the presidency (~55% implied) than do betting markets (which are closer to 55-60% for Trump). However we agree that the most single common (modal) scenario is a “clean sweep” by the Republicans of each of the Presidency/Senate/House. Either way, there is no clear outcome implied by either our assessment or betting odds.
For a comprehensive summary of the market-relevant policies proposed by Kamala Harris and Donald Trump on the campaign trail please see the MNI 2024 Presidential Election Policy Tracker here (PDF). In short, we have no reason to argue with the generally-accepted view that the following political configurations have the following macro consequences: