The Fed tries to stay above politics. But a lot is at stake for the central bank on Election Day.

Published On Nov 5, 2024, 4:00 AM

The upcoming election is pivotal for the Federal Reserve, as the next president will influence its direction and decision-making. The investment climate could shift significantly depending on whether a more interventionist figure like Donald Trump or a more restrained one like Kamala Harris takes office. Trump has expressed desires for increased influence over the Fed, which may create uncertainty in monetary policy. Meanwhile, Harris emphasizes the importance of Fed independence. A key factor will be the Federal Open Market Committee's (FOMC) decisions on interest rates, which markets expect to be influenced by election outcomes.

Stock Forecasts

The upcoming election may lead to volatility in the stock market due to uncertainty regarding monetary policy. A scenario where Trump wins could lead to a negative investment climate due to potential political interference in the Federal Reserve, whereas a Harris win might lead to stability and confidence in Fed independence.

If Trump pushes for changes at the Fed that disrupt traditional independence, sectors sensitive to interest rate changes may suffer. Conversely, if Harris wins and prioritizes independence, it may provide a more stable environment for economic growth, favoring equities.

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Former President Trump is strongly favored to beat Vice President Harris in the 2024 presidential election, according to all but one prediction market.

Investors are bracing for a week of potentially huge market-moving events — the presidential election and the Federal Reserve policy decision.