U.S. Elections 2024: The potential power gap and scenarios for their consequences in the global economy

Screenplay for the next day of the presidentials of November 5 on has nothing to do with which of the two contenders (i.e. Kamala Harris or Donald Trump) will finish first, but also with the possibility of a “empty power”. The “power gap” could exist in case the outcome of the U.S. election is controversial from Trump’s side or Harris’ side, which would spark a judicial dispute between the two demands of the power. However, internal political uncertainty in the U.S. is only a potential risk from the election result, for which investors should prepare themselves, says a report by Handelsblatt. 1. China could exploit a domestic power vacuum Analysts warn that an internal power vacuum could encourage U.S. opponents and first – first China which could exploit a US weakness caused by internal conflicts. In any case, this would lead to uncertainty, which would also have a significant impact on markets. It all depends on the scenario of China’s possible exclusion of Taiwan. At the same time, however, analysts also warn of geopolitical tensions. If the US is involved in a war in the Middle East, China could see this as a good opportunity to take advantage of this weakness. The global technology industry depends on Taiwan, while Nvidia, the well-known American chip manufacturer for artificial intelligence (AI), also produces there. 2. Scale the existing conflicts Even if there is no chaos as on 6 January 2021, an internal political paralysis in the US could fuel conflicts worldwide. A major war between Israel and Iran would raise the cost of oil and gas, sparking a new wave of inflation, predict analysts. In a recent CBS interview, Kamala Harris described Iran as the most dangerous enemy in the US, but this caused the experts’ strong response to security issues, who tended to point out China. 3. Higher taxes or higher duties However, even in the event of a clear election result, investors must be prepared for a change in commercial or tax policy. Under Trump lower taxes and higher duties are expected, under Harris rather higher taxes, analysts note. Economists are very concerned about Trump’s plans to seal the US through higher tariffs. While Trump suggests that duties will be paid by the exporting countries, such as China, they are in fact mainly burdening American consumers. While Germany used to depend on Russian energy, Chinese customers and the US military, the US, as a major supplier of liquefied natural gas and even more important market for German exports, now play a leading role in all three of these important issues, other analysts say. This results in a new, American-centric German risk, also in securities portfolios. To sum up the results, three key points distinguish between the capital market: Increasing uncertainty, which could lead to a reduction in the disposal of risk Increasing risks to technology shares and the explosion of the artificial intelligence stock market Refunds for investors in emerging markets, as Taiwan is still one of them, despite the modern technology industry and China are still the weight in the sector. And then there’s the risk of inflation getting worse again. At the same time, however, the defence industry has already benefited from the war in Ukraine, as shown by Rheinmetall’s stock prices, for example. Trump’s victory will possibly be linked to the US leaving Europe and the need for more of their own equipment.