Impact of a Potential Trump Victory on European Markets

JPMorgan analysts stated that if former President Donald Trump wins the 2024 U.S. presidential election, it could lead to new tariffs, resulting in increased volatility in European markets compared to the U.S.

Effects on European Equities

The bank points out that European equities, especially in export-driven sectors, would be significantly impacted by these potential trade policies due to the region's dependence on global exports.

In anticipation of a Trump victory, JPMorgan predicts that tariffs could be imposed soon after the inauguration on January 20, 2025. They expect this to affect Eurozone equity index volatilities more than those of U.S. equities.

Market Adjustments

A Trump win would likely compel market participants to reshape their positions across global assets, creating a ripple effect across U.S. and European markets.

JPMorgan's analysts note that U.S. equity option markets are pricing in "limited risk" for the upcoming election, with an implied one-day move for the Euro STOXX 50 of about 1.6%. This figure is considered modest in a historical context and lower than earlier fluctuations noted during previous French presidential elections.

Even with a split Congress, JPMorgan notes that tariffs might still be enacted, potentially strengthening the dollar and further affecting European markets.

Investment Strategies

The bank’s strategists recommend that investors explore trading strategies centered on European equity volatility. JPMorgan’s equity and FX teams contend that a Republican win would likely favor U.S. assets in the medium-term, supported by expected tariffs, fiscal leniency, and a robust dollar.