Betting markets swing in Harris’ favour after debate with Trump

New York — Investors scrambled to shift their positioning on Wednesday after a closely watched debate between Republican Donald Trump and Democratic vice-president Kamala Harris, as betting markets swung in Harris’ favour after the event.

Shares of Trump Media & Technology Group, the company that owns Truth Social, slumped about 14% on Wednesday, while bitcoin and crypto stocks retreated. Solar stocks, seen by analysts as benefiting from a Harris win, rallied and healthcare shares fell.

In a combative debate late on Tuesday, Trump and Harris clashed over everything from the economy to immigration and Trump’s legal woes, as each sought a campaign-altering moment in what has been a closely fought race.

Their exchanges left investors with few new details on issues that could sway markets, including tariffs, taxes and regulation. But online prediction markets showed bets on a stronger likelihood of a Harris win in November: Harris’ odds in PredictIt’s 2024 presidential general election market improved to 55c from 53c before the debate, while Trump’s odds slipped to 47c from 52c.

There is a “general view that Harris won the debate”, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “It’s obviously not a slam dunk for Harris, but the chances of a Trump victory have slipped a bit.”

While the presidential race is very much on investors’ minds, political concerns have lately coalesced with more immediate market catalysts, including worries over a potentially softening US economy and uncertainty over how deeply the Fed will need to cut interest rates. The S&P 500 notched its worst weekly percentage loss since March 2023 last week after a second-consecutive underwhelming jobs report, though the index is still up about 13% this year.

Decisive edge

Still, some investors believe even a small shift in perceptions of the candidates could prove significant in a contest that could come down to tens of thousands of votes in a handful of states. The two candidates are effectively tied in the seven battleground states likely to decide the election, according to polling averages compiled by the New York Times.

“The US presidential debate achieved its goal by providing a decisive edge to one of the candidates in what has been an exceptionally close race,” said Charu Chanana, head of FX strategy and global market strategist at Saxo. “Crypto and energy stocks might face headwinds as market sentiment adjusts to the shifting political dynamics.”

Trump has positioned himself as a procryptocurrency candidate.

While it was hard to separate election-fuelled moves from macroeconomic-driven action in the dollar, rates and stocks after Wednesday’s highly awaited report on US consumer prices, investors pointed to several corners of the market where the debate appeared to have made an impact.

Investors hammered the shares of Trump Media & Technology Group, which have been popular among retail traders and sensitive to the former president’s chances of a win in the election. The stock as much as 18% to a new post-IPO low of $15.30. Bitcoin was down about 3%, while shares of cryptocurrency-focused companies such as crypto miners Riot Platforms and Marathon Digital also fell.

US-listed shares of solar companies, seen as benefiting from a Harris win, rose with Sunrun, up 8%, and SolarEdge Technologies, up 9%, among the biggest gainers in the sector.

Health insurer stocks including Humana, CVS Health and UnitedHealth were also down on Wednesday. Some analysts believe Harris’ push to lower drug prices may weigh on the sector.

Hurt profits

Trump has promised lower corporate taxes and a tougher stance on trade and tariffs. He has also said a strong dollar hurts the US, though some analysts believe his policies could spur inflation and eventually buoy the currency.

Harris last month outlined plans to raise the corporate tax rate to 28% from 21%, a proposal that some on Wall Street believe could hurt corporate profits.

On Tuesday night, Harris attacked Trump’s intention to impose high tariffs on foreign goods — a proposal she has likened to a sales tax on the middle class — while touting her plan to offer tax benefits to families and small businesses.

Trump defended his tariffs proposal and said they would not lead to higher prices for Americans.

The Chinese yuan, which had come under pressure in the US-China trade war during Trump’s term, edged up against the dollar on Wednesday.

Trump also criticised Harris for the persistent inflation during the Biden administration’s term. Inflation, he said, “has been a disaster for people, for the middle class, for every class”.

However, economic policies could be up in the air for a while longer.

“There wasn’t much substantive discussion of policy,” said Sonu Varghese, global macro strategist at Carson Group. “Neither candidate advocated for vastly different economic policies than currently in place. Ultimately, a lot of economic policies that we see implemented next year will depend on the makeup of the Senate and the House.”

Reuters