Dow Jones and S&P 500 Forecast: How Election and Fed Moves Could Reshape Market Trends

Wall Street Struggles as U.S. Election and Fed Meeting Loom

U.S. stock indexes traded flat to slightly lower on Monday as investors braced for a volatile week shaped by the U.S. presidential election and the Federal Reserve’s November policy meeting. With the election between Democratic candidate Kamala Harris and incumbent Republican Donald Trump projected to be tight, many investors expect uncertainty if the winner isn’t confirmed immediately. This anticipation of a delayed result has made markets cautious, with few making significant moves.

Election Jitters Impact Key Markets

As polls showed Harris gaining ground in key states like Iowa, some “Trump trades” — investments sensitive to Trump’s policy direction — saw declines. The U.S. dollar and bond yields dipped alongside Bitcoin as Harris’s odds improved on major betting platforms, signaling potential policy changes if she wins. Analysts noted that the election’s outcome could drive substantial shifts in market positioning, and many investors are adopting a conservative approach until results clarify.

Fed Rate Cut Anticipated as Economy Slows

The Federal Reserve’s upcoming meeting on Thursday is expected to culminate in a 25-basis-point rate cut, which aims to stabilize economic growth amid uncertainty and recent weakness in manufacturing. While this cut is widely expected, its impact may hinge on election developments. If political tensions escalate, the Fed’s rate decision could either help steady markets or add to the unease if it fails to calm investor nerves.

Sector Highlights and Key Stocks Under Pressure

Energy stocks managed gains, with the sector up 1.6% as oil prices rose over 2% on OPEC+’s decision to delay production increases. Meanwhile, technology stocks were mixed; Tesla dropped 2.4% following weaker China sales in October, and Intel slipped 3% after news that Nvidia would replace it in the Dow Jones Industrial Average. Marriott also declined, down 2% after lowering its 2024 profit outlook on weakening travel demand, while Constellation Energy saw a sharp 12.4% loss following disappointing earnings, weighing on utilities.

Elevated Volatility Reflects Market Caution

The CBOE Volatility Index (VIX) remained well above its 30-day moving average at 22.39, reflecting heightened market caution. Though below the 2020 election levels, the VIX’s sustained elevation signals that investors are wary of increased price swings, with many waiting for clarity.

Market Outlook: High Volatility Ahead

As the election unfolds alongside the Fed’s policy decision, markets are poised for high volatility. A clear election result could ease pressure and support risk assets, but a protracted result would likely sustain volatility. With cautious trading expected, investors should prepare for potential shifts based on both political and policy outcomes in the days ahead.