Traders are alert to the potential for volatility in the build-up to Election 2024. The race between Democrat Kamala Harris and Republican Donald Trump is neck-and-neck, resulting in an uncertain outcome. What’s more, the battle for control of Congress could impact market reactions if policy proposals are put in place.

While Election 2024 and Algo Trading Risks outcomes can have short-term impacts on the stock market, long-term investment performance is driven by economic and inflation trends rather than presidential elections. This is particularly true if the results of an election don’t change proposed policies, regulations or global conflicts.

As a result, it’s important that traders remain focused on macro trends and fundamental news ahead of an election. Additionally, they should consider how the outcome of an election may affect futures markets. For example, a shift in foreign policy – as reflected in candidates’ platforms on topics like immigration, taxation and trade – could heighten volatility in currency futures markets.

Election 2024: How Political Uncertainty Could Impact Algo Trading

For automated traders, it’s also important to monitor changes in liquidity before and after an election. Reduced liquidity can lead to exacerbated moves in an instrument’s price, increasing the risk of algorithmic trading risks. This is a key element of MiFID II’s Regulatory Technical Standard 6 (RTS 6) designed to mitigate systemic risks and ensure the resilience of automated trading strategies during critical periods.