The US election is casting a large shadow across global financial markets
From Mexico to China to Europe to Japan, financial markets are bracing for volatility from the US election results.
It’s America’s election, but it’s everyone’s problem.
The ramifications of the 2024 presidential election will extend far beyond America’s border, and financial markets have taken note.
Of course, there’s the potential for trade policy to change meaningfully in the event that Republican nominee Donald Trump emerges victorious. But simply the US’s place as the top dog in the global economy means the question of whether control of Congress and the presidency is united under one party or divided is just as momentous, if not more so, for the fiscal-policy outlook as whether Trump or Harris wins.
Within emerging markets, there are two standouts:
Overnight volatility for the US dollar / Mexican peso cross is at its highest since October 2008, amid the financial crisis.
For the US dollar relative to the offshore Chinese yuan, overnight vol is at a record.
On a related note, total put interest (that is, the number of bearish options contracts outstanding) for the iShares MSCI Mexico ETF has ramped recently to levels not seen since Trump’s presidency.
Even in European stocks, traders are paying a premium for shorter-term options that protect against market declines compared to those that offer exposure to upside moves.
And Japan’s equivalent of the VIX Index continues to linger at elevated levels not seen for the lion’s share of the past two years.
