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With the next U.S. election just around the corner, there’s a lot of buzz about how the outcome could shake things up. Whether you’re watching your stock portfolio, keeping an eye on your crypto investments, or just wondering how it might hit your paycheck, it’s worth considering how this election could affect the economy. Let’s break down what might happen in the markets, the crypto world, and for the middle-class folks who make up the backbone of the economy.

1. How Markets Could React

Elections tend to make investors a little jittery, and this one is no exception. So, let’s dive into some possibilities:

• Stock Market Ups and Downs: The stock market can be a bit of a roller coaster during election years. Historically, the S&P 500 has managed an average gain of 6.5% in election years since 1950, but not without a few dips and twists along the way. For example, the CBOE Volatility Index (VIX), also known as the “fear gauge,” usually spikes during these periods of uncertainty. Remember the 2020 election? The VIX jumped more than 40% in the weeks before the vote. So, if you see some turbulence in your investments, don’t be too surprised—it’s pretty par for the course.
• Interest Rates and the Fed’s Game Plan: The Federal Reserve will likely be watching the election closely, just like everyone else. Depending on which policies are in the cards, we could see changes in how the Fed handles interest rates. For example, if there’s a big push for government spending, the Fed might raise rates to keep inflation in check. Right now, inflation is around 3.2%—down from the 9.1% peak in 2022, but still above the Fed’s 2% target. If inflation looks like it might rise again, borrowing could get more expensive for everyone, from homeowners to businesses.
• Global Trade Moves: Trade policy is always a hot topic in elections, and changes could send ripples around the globe. Remember the U.S.-China trade war from 2018 to 2020? Tariffs on over $360 billion worth of goods sent markets into a tailspin and shaved a little off global GDP growth—about 0.1% to 0.2% annually, according to the IMF. This election could either smooth over existing trade tensions or spark new ones, depending on how things shake out.

2. The Crypto World: Boom or Bust?

Cryptocurrency is still the new kid on the block, but it’s making waves. Here’s how the election could impact this high-energy market:

• Regulation and Rules: Different candidates and parties have wildly different views on crypto regulation. Some favor a hands-off approach to foster innovation, while others are all about tightening the reins. We’ve already seen some talk of a 30% tax on electricity used for crypto mining, not to mention beefed-up KYC requirements for crypto exchanges. When rumors of these regulations leaked in March 2023, Bitcoin’s price dropped by 15%. So, expect more of the same if regulatory chatter picks up.
• Digital Dollar Decisions: The U.S. is flirting with the idea of a Central Bank Digital Currency (CBDC)—basically a digital version of the dollar. Whether this gets fast-tracked or slowed down could depend on who wins in November. A “digital dollar” might challenge stablecoins like Tether and USD Coin, which currently have market caps of $82 billion and $53 billion, respectively. If the government steps in with its own digital currency, we could see some big moves in the crypto space.
• The Sentiment Factor: Crypto is often seen as a hedge against traditional market risks. In times of uncertainty—like, say, an election year—people might flock to Bitcoin or other cryptos as a safe haven. Remember in 2020, when Bitcoin’s price surged by 50%? That was partly due to the pandemic, but election jitters played a role too. If we see clear regulatory guidance or a more crypto-friendly environment post-election, it could also mean a boost for this market.

3. What’s in Store for the Middle Class?

The middle class—the heart and soul of the U.S. economy—has a lot riding on this election. Here’s what might happen:

• Tax Changes: Tax policy is a big deal for the middle class. For instance, the Tax Cuts and Jobs Act (TCJA) of 2017 lowered the effective tax rate for the middle 20% of earners from 13.6% to 12.4%. But some provisions of the TCJA are set to expire in 2025. A new administration might extend these cuts, let them expire, or even introduce new ones—each of which could directly impact your take-home pay.
• Jobs and Paychecks: Job growth and wages are crucial, especially if you’re a middle-class worker. As of July 2024, the unemployment rate is hanging around 3.8%—pretty low, but wage growth has slowed down to 3.1% from a peak of 5.9% in 2022. Depending on the election results, we might see policies aimed at boosting job creation in sectors like manufacturing, tech, and renewable energy, which could be great for wages. Alternatively, if policies shift away from these areas, job growth could slow, and wage increases might be harder to come by.
• Healthcare and Pocketbook Pain: Healthcare is always a significant expense for middle-class families. Right now, the average household spends about $5,000 per year on out-of-pocket healthcare costs, according to the Kaiser Family Foundation. If new policies expand programs like the Affordable Care Act (ACA), it could mean more subsidies and lower costs. But if subsidies get cut, expect those costs to climb. So, keep an eye on healthcare policy proposals.
• Cost of Living: Inflation is still a big question mark. The Consumer Price Index (CPI) jumped 13.5% between 2020 and 2022, affecting everything from groceries to gas. Future policies will likely aim to control inflation without hurting growth, but there’s a fine line to walk. If inflation rises too fast, it could eat away at middle-class purchasing power, making it harder to make ends meet.

Final Thoughts

Elections always bring some level of uncertainty, and the 2024 U.S. election is no different. From stock market swings to potential new crypto regulations, to changes in tax and healthcare policy, there’s a lot to think about.

Whether you’re an investor trying to read the tea leaves, a crypto enthusiast looking for the next big move, or just a middle-class American trying to make the best choices for your family, staying informed and ready for whatever comes next is the smartest move.

Buckle up—it’s going to be an interesting ride!