Some investors are already gaming out how the U.S. 2024 presidential election could impact markets, as former president Donald Trump’s victory in the New Hampshire Republican primary brings him closer to a rematch with Democratic President Joe Biden.

Any calculation of how stocks, bonds and currencies could react to the results of the November vote comes with caveats —especially since it’s early in the year and betting markets are split on which candidate will prevail. Most investors also believe drivers such as Federal Reserve policy, the economic cycle and corporate earnings will ultimately matter more for markets over the long term.

Nevertheless, expectations for politically fueled moves in asset prices around the 2024 vote are high among some strategists, with Goldman Sachs saying the election could be a “major market event.”

Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute, said a second term for either Biden or Trump could heighten focus on issues they have already emphasized in their first term, such as tax cuts for Trump and environmental spending for Biden.

FOCUS ON TAXES

“Neither one has really changed all that much with respect to their philosophy and what their goals are. If anything they might lean harder onto them,” he said.

For now, the market’s spirits are high. After a wild two-year ride, the S&P 500 stands at an all-time record on expectations that the Fed will cut interest rates later this year while the economy remains resilient. Bets on Fed easing have also brought down Treasury yields, which move inversely to prices, from last year’s 16-year highs.

Lower taxes could give a broad boost to equity markets if Trump wins and succeeds in making his 2017 cuts permanent — though fears of a revived trade battle with China might counterbalance some of those gains, analysts at TD Securities wrote in a recent report. Trump has proposed to increase tariffs by 10% across the board to bolster U.S. manufacturing.

Tax cuts could also stir fears of growing budget deficits and weigh on Treasury prices by pushing up term premium — a measure of the compensation investors demand for holding long-term bonds, the firm wrote.

Rating agency Fitch last summer downgraded the U.S. government’s top credit rating, citing factors including expected fiscal deterioration in coming years.

A Biden win might mean higher corporate taxes, a possible negative for stocks, according to TD’s analysts. The degree to which either candidate is able to push through his respective policies could well depend on which party gains control of the House and Senate, they added.

RENEWABLE ENERGY

Shares of solar stocks and other renewable energy companies — many of which have been pressured by higher interest rates — stand to benefit from a re-election of Biden due to his expected support of clean energy initiatives, said King Lip, chief strategist at Baker Avenue Wealth Management.

“With rates coming down and continued high government spending on these projects ... I think the clean energy industry can do quite well actually under a second Biden administration,” Lip said.

Analysts at Neuberger Berman, meanwhile, said a Republican sweep could trigger a "significant relief rally" for large-cap pharmaceutical companies that would be less likely to see drug price controls implemented as part of the Inflation Reduction Act.

"As a domestically focused sector, healthcare services could ... be a shelter from the trade policies of a Trump administration," wrote Joseph Amato, Neuberger’s chief investment officer, equities.

Some Trump-linked stocks have already seen sharp moves: shares of Digital World Acquisition, the blank check firm set to take his social media platform public, soared on Monday after Florida Governor Ron DeSantis ended his 2024 presidential bid, though they have since pared those gains.

In foreign exchange markets, Goldman Sachs strategists said a Trump presidency could boost the U.S. dollar. Their analysis, which studied a period of dollar strength following Trump’s victory in the Iowa caucus on Jan. 15, “suggests that Trump’s trade and international agenda might ultimately be worth a further 5-10% of upside to the USD in the event of a Trump presidency,” they wrote in a Jan. 22 report.

Strategists warned, however, that markets may be slow to price in any possible outcomes this far from election day.

“The last few elections have really come down to the wire,” said Samana, of Wells Fargo. “I don’t see the market making big bets on either one unless it starts to look like it will be a runaway.