US election 2024: Paths to victory for Kamala Harris and Donald Trump

Overview

The US 2024 presidential election is shaping up to be a closely contested race, with Kamala Harris and Donald Trump vying for the lead in national and state polls. National polling average shows that it is almost neck and neck between the two candidates, while the electoral college dynamics are likely to inject further uncertainties into the presidential outcome.

Despite some slight unwinding of the ‘Trump trade’ into the new week, the US dollar managed to regain some footing overnight, largely as a result of traders managing their positioning for the risks of a potential surprise. We may likely expect more consolidation ahead in the lead-up to the US election before a surge in volatility once election uncertainties clear.

For now, it can be hard to pinpoint an immediate direction for the equities market in the near term, with either scenario bringing both a bull and bear case. But any weakness may offer opportunities for dip-buying, as economic fundamentals may eventually take over while policy uncertainty clears, alongside the general positive seasonality into year-end and post-elections.

Paths to victory for Kamala Harris

Most US states are traditionally Democratic or Republican states, and assuming no surprises on those fronts, it will once again boil down to the key battleground states to determine who sits on the US president seat. With traditionally Democratic states accounting for 226 votes, Kamala Harris will need to secure another 44 votes to achieve the 270 votes required to win.

Her path to victory may be:

1. The most clear-cut path for Harris may be to reclaim all traditional Midwest battlegrounds (Michigan +15, Wisconsin +10, Pennsylvania +19), which will offer her the exact amount of votes to secure her victory. Current polling shows that Harris has a slight lead over Trump in Wisconsin and Michigan, but Pennsylvania remains tight at a 0.3% margin. Claiming Pennsylvania will be a big boost to either side, given that it accounts for the most electoral votes (+19) among the battleground states.

2. Another path for Harris may be to secure its 2020 Sun Belt states (Arizona, Nevada and Georgia), where demographic changes in terms of younger/Hispanic voters are favouring Democrats. These states were narrowly won by Democrats in 2020, so retaining control of these states will offer flexibility, where Harris will only need to win one more swing states (excluding Wisconsin) to cross the line.

Paths to victory for Donald Trump

With traditionally Republican states accounting for 219 votes, Donald Trump will need an additional 51 votes from the battleground states to secure his victory.

1. Given the larger amount of votes needed to cross the line relative to Harris, winning Pennsylvania may be crucial for Trump to ease his victory path in the likes of 2016.
   As long as Pennsylvania is under his belt, he will need to retain control of North Carolina (a state which backed Republican on 9 out of 10 past elections) and flip Georgia to meet the mark.

2. Failure to win over Pennsylvania may see Trump on an uphill battle, where he need to win almost all of the Sun Belt battleground states (North Carolina +15, Arizona +11, Georgia +16), along with one other traditional Midwest (Wisconsin +10 or Michigan +15).
   

What to watch on election day?

On election day, polls in Georgia, North Carolina and Pennsylvania may close slightly ahead of the rest. If the initial results were to show Kamala Harris having a win in at least two out of the three states, we may see markets starting to position heavily for a Harris presidency and that may be a trigger for some unwinding in the ‘Trump trade’. Being the state with the highest electoral votes, there is little doubt that Pennsylvania will be key in swaying the odds between the two candidates.

US dollar index: highly sensitive to odds of presidential outcome

For now, the long-US dollar trades have taken a pause, with all eyes on an actual Trump victory this week, or particularly a Red Wave scenario, to validate the ‘Trump trade’. Failure to do so could see some unwinding, at a time where average year-end seasonality for the US dollar also tends to be bearish.

On the four-hour chart, the US dollar is attempting to regain some footing following a break below a near-term upward trendline support and its Ichimoku Cloud zone. We may need to see a move in its relative strength index (RSI) back above the mid-line to reflect buyers taking on greater control. Until then, further downside may leave the 103.10 level on watch next.

Nasdaq 100: trendline breakdown remains in focus

The Nasdaq 100 index remains fragile for now, as the wait for more political clarity out of the US dampens market appetite for risk-taking. On the four-hour chart, the index has broken below an upward trendline, with the 20,166 level offering immediate resistance to overcome. On the daily chart, its daily RSI has also dipped below the mid-line for the first time since September this year, which denotes abating upside momentum for now.

Failure to overcome the trendline resistance may call for further unwinding towards the 19,875 level, followed by the 19,288 level. A move above last Thursday’s high may be warranted to denote buyers in stronger control.