João Queiroz: “Elections in the US have a high capacity to influence the Fed”

The next occupant of the White House has the capacity to generate volatility in financial markets and even, even indirectly, influence decisions by the US Federal Reserve (Fed), says João Queiroz, "head of negotiation" at Banco Carregosa, in an interview with Negócios no under the Stock Exchange Game, which starts today and runs until the end of the month.

What do you expect the impact of the US elections to be?
Elections in the US have the capacity to generate volatility in financial markets, depending on the degree of uncertainty regarding the results and the degree of pursuit of economic policies defended by the candidates. Historically, uncertainty surrounding elections tends to increase volatility, which is already evident in VIX volatility where the average over the last 30 days is 19.7 points, as investors adjust positions based on different proposed economic agendas. and budgetary.

Does it differ between candidates?
If a pro-market candidate, with policies to stimulate growth and the private sector, wins, it could result in an increase in risk appetite and share appreciation. However, a victory for a candidate with more restrictive tax policies or those focused on additional regulation could bring some pressure to the markets. Additionally, the results may directly impact the Fed's monetary policy, taxation and regulation of relevant sectors, such as technology and energy, influencing investor expectations.

To what extent will this influence Fed policy?
US elections have a high capacity to indirectly influence the Fed's policies, but the immediate impact tends to be limited due to that institution's independent mandate. Its monetary policy is primarily driven by economic data, such as inflation and unemployment, rather than short-term policy changes. However, depending on the winner of these elections, there may be relevant changes and adaptations to fiscal policies that affect the economy in the medium term.

In what way?
If the president-elect adopts an expansionary fiscal policy, such as large stimulus packages or increases in public spending, the Fed may have to adjust its monetary policy to balance the inflationary effects. Likewise, restrictive tax and fiscal policies could pressure the Fed to adopt a more accommodative stance to support economic growth. Therefore, although the Fed maintains its independence, elections can shape the economic context in which its decisions are made.

Along with monetary policy and the US elections, what factors are you looking at?
In addition to monetary policy and the US elections, there are several critical factors that will influence markets until the end of the year. The evolution of energy prices, especially oil and natural gas, could be a key factor, as it could reverse progress in reducing inflation. Economic indicators such as GDP growth, employment data, and consumption, especially in the US, Europe and China, must be monitored closely and regularly with a more pronounced slowdown in any of these economies with the capacity to increase volatility and affect investment decisions. Tensions in regions such as the Middle East or Ukraine/Russia could disrupt energy markets and logistics chains, impacting both growth and global inflation. Company performance, especially in the third and fourth quarters, will provide indications about the resilience in generating results in the face of the still high interest rate environment and persistent inflation in the services sector, sectors such as technology, consumer and energy that may be under pressure. particular attention from investors. The aforementioned factors, combined with the decisions of the Fed and the European Central Bank (ECB), as well as the results of the US elections, have the capacity to influence the economic and market scenario until the end of the year and the transition to the next.