Business: Global investors were on edge as Americans headed to the polls on Tuesday, drawing to a close a dramatic US election cycle that has moved bonds, stocks and other assets in recent months and could further sway markets as results become clearer. One of the most unusual elections in modern US history could yield starkly different implications for tax and trade policy as well as for US institutions depending on whether Republican Donald Trump or Democrat Kamala Harris prevails.

The results could rattle assets around the world and lead to broad financial fallout, including on the outlook for US debt, the strength of the dollar and a host of industries that make up the backbone of Corporate America. With polls showing a deadheat between the former president and the current vice president and control of the US Congress also at stake, investors are wary of any unclear or contested result that could fuel volatility stemming from any lasting uncertainty about the political backdrop.

All eyes on US election results

As votes start to be reported on Tuesday evening, investors will train their attention on tallies from a handful of bellwether counties across the country that could indicate early clues about the winner. But many of the battleground states that will decide the race may not have meaningful results until at least late at night. "This is the most significant election that I have seen in my career," said Mike Mullaney, director of global markets research at Boston Partners, who has worked in investment management for over 40 years. "It's going to be very bifurcated, with certain things happening under Trump winning, and certain things happening under Harris winning," Mullaney said.

The four largest US banks encouraged their workers to participate. JPMorgan Chase, Bank of America, Citigroupand Wells Fargo gave employees several hours of paid time off to vote, while some lenders underscored the need to work across political lines. The focus on the election follows a rally in stocks that has taken the S&P 500 to record highs in 2024 with a roughly 21% year-to-date run, driven by a robust economy, strong corporate profits and interest rate cuts from the Federal Reserve.

The S&P 500, opens new tab climbed 1% on Tuesday afternoon, with several assets whose recent price swings have been linked to Trump's standing in polls and betting markets gaining ground.

Several measures of trader demand for protection against outsized overnight price swings in the currency market surged to their highest levels since the November 2016 election.

Bets swaying markets

Bets on the election outcome have had a hand in swaying markets. Traders have cited Trump's gains in polls and betting markets as a factor driving assets that could be influenced by his pledges to raise tariffs, cut taxes and decrease regulations. Those so-called Trump trades include tumbles in the Mexican peso, which could be hit by tariffs, wild swings in the shares of Trump Media and Technology Group and rallies in industries that could benefit from looser regulation, such as regional banks and bitcoin.

Yields on Treasuries - which move inversely to bond prices - have also risen, as investors price in potentially higher inflation, another projected consequence of Trump's policies. Trump Media shares were up around 12% on Tuesday afternoon, while bitcoin was up some 4% as betting markets leaned more heavily in favour of Trump.

What happens to market if Trump wins?

Several analysts said the so-called Trump trades were strengthening in the absence of new catalysts, and cautioned that results were still too close to call. "People who back the former president tend to be quite enthusiastic," said Steve Sosnick, market strategist at Interactive Brokers. "This is their last opportunity to express that enthusiasm in the market."

A Harris presidency, meanwhile, is expected to result in tougher regulations, more support for clean energy and potentially higher taxes on companies and wealthier individuals. "The market is getting pulled and pushed in different directions here as investors try to price in a lot of unknowns as it relates to the election," said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. "In the next week or so we will get certainty; either it reinforces this positioning or there is going to be a shakeout."