LDN - Business

Fiery debate gives Wall Street few new details on key issues

[September 11, 2024] By Saqib Iqbal Ahmed and Suzanne McGee

NEW YORK (Reuters) - Wall Street remained on edge as a closely watched debate between Republican Donald Trump and Democratic Vice President Kamala Harris late Tuesday gave investors little clarity on key policy issues, even as betting markets swung in Harris’ favor after the event.

In a combative debate, 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. Some observers, however, said Harris performed better than expected and that it may continue to sway prices for some assets in coming days should investors decide it improved her chances at gaining the White House.

"Neither one of them made strong economic points, but overall Harris came out of this better than Trump," said Eric Beyrich, portfolio manager, Sound Income Strategies, in Westchester, New York. "Markets really don’t want strident statements; they want clarity."

Online prediction market PredictIt's 2024 presidential general election market showed Harris' odds improving to 56% from 53% before the debate, while Trump's odds slipped to 48% from 52%.

Reaction in asset prices was muted. Stock futures eased as the debate progressed, with the S&P 500 E-minis down 0.5% early Wednesday in Asia and Nasdaq 100 E-minis off 0.6%.

The dollar index, which measures the U.S. currency's strength against six major peers, slipped 0.2%.

"I think the debate is not going to change many minds, as voters remain closely divided,” said Sonu Varghese, global macro strategist at the Carson Group. “The only indication is that Harris moved ahead in prediction markets but that still keeps the race very close.”

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 debate “does not seem to be having a major impact on markets so far, which aligns with the relatively low volatility expectations heading into the event,” said Shier Lee Lim, Lead FX and Macro Strategist for APAC at Convera. “That said, the debate could still prove to be a significant catalyst for shifting election probabilities.”

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 U.S. economy and uncertainty over how deeply the Fed will need to cut interest rates, investors said. The S&P 500 notched its worst weekly percentage loss since March 2023 last week after a second-straight underwhelming jobs report, though the index is still up nearly 15% this year.

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A screen displays the presidential debate hosted by ABC between Republican presidential nominee, former U.S. President Donald Trump and Democratic presidential nominee, U.S. Vice President Kamala Harris in Philadelphia, Pennsylvania, U.S., September 10, 2024. REUTERS/Evelyn Hockstein

TAXES AND TARIFFS

Trump has promised lower corporate taxes and a tougher stance on trade and tariffs. He has also said a strong dollar hurts the U.S., 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 U.S.-China trade war during Trump's term, edged up against the dollar.

"Kamala Harris succeeded in shifting prediction market odds in her favor, supporting a mild, but broad-based improvement in risk appetite across currency markets,” said Karl Schamotta, chief market strategist, at Corpay in Toronto.

Trump also criticized 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," Carson Group's Varghese said. "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."

(Reporting by Saqib Iqbal Ahmed and Suzanne McGee; Additional reporting by Rae Wee in Singpaore; Editing by Ira Iosebashvili, Megan Davies and Shri Navaratnam)

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