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US elections: Views from the investment community

Most investment professionals are positive about the financial markets longer-term, regardless of who wins the presidential race.
Republicans x Democrats

Although the winner of the US presidential election remained unclear yesterday, investors have piled on the US equities market. The S&P 500 rose 2.2% yesterday, which was the best day in five months.

Among those that led the rally were technology names, with the S&P North American Technology Sector Index rising 4.51%. Share prices of some of the major technology companies surged – Facebook was up 8.32%, while Amazon and Netflix rose by at least 6%.

As of this writing, Joe Biden leads with 264 electoral votes, while President Donald Trump has 214. Although results of the overall elections are not yet finalised, it is now clear there is no “blue wave”, dissipating several uncertainties in the market, according to several investment professionals.

Against the current backdrop, Fund Selector Asia has compiled comments from the investment community about their views on how elections results will impact financial markets.

Eli Lee, head of investment strategy at Bank of Singapore: A Biden win with a divided Congress is only the second best scenario for markets

“At this point, barring major surprises, we believe that Biden will take over the administration with a divided Congress, that is, the Senate under the control of a Republican Party majority, and the House of Representatives by the Democratic Party.

“We expect the Republican Senate to take an obstructionist role, similar to what we saw in the last years of Obama’s Presidency.

“On the bright side, Trump’s tax cuts are unlikely to be reversed under this scenario; but on the other hand, the odds of sweeping stimulus spending on infrastructure, environment, and healthcare that Biden has proposed are far diminished.

“Overall, despite the scenario of a Biden win with a divided Congress is only the second best scenario for markets, we still see many positives. the reduced uncertainty from putting the election behind us will help investor sentiment and also give the Fed the necessary clarity for crafting policy ahead.

“Under a Biden Presidency, we expect an overall environment characterised by the post-pandemic economic recovery, moderately higher inflation, and a weaker US dollar. This will be broadly supportive of equities, credit, commodities and emerging markets.”

Stephen Dover, head of equities at Franklin Templeton Investments: Election is not going to be the biggest factor

“While there is uncertainty, there does seem to be some certainty that there’s not going to be a big change in policy one way or the other, regardless of who’s the president, or even who controls the Senate. So that actually provides some certainty to the market that we’re not going to have big, big changes and I think that’s probably why the market’s positive today.

“Probably the election is not going to be the biggest factor on what happens in the markets over the next coming few months. It’s going to much more likely be the path of the Covid than what happens with the elections. And, I’d say for, I think for almost all of the managers within Franklin Templeton, they have not made big changes to their portfolios based on their predictions of what was going to happen in the election.

“Over the last couple of weeks, we were trying to look out what is likely to outperform the best over the next one, three years. It’s very, very difficult to make short-term predictions. And, if there’s anything that I would hope investors would learn from this last week or two, is that it’s very hard to make macro decisions and decisions based on elections or that type of event.”

Jan Blakely Holman, director of advisor education at Thornburg Investment Management: “It hasn’t really mattered”

“Let’s revisit the returns of the S&P 500, following the past elections. The truth is that who is president hasn’t really mattered. Out of the 23 administrations since 1929, only four have delivered negative investment returns. That means 83% of the time investors have earned positive returns regardless of the president.

“Despite short-term market fluctuations, investors who invest for the long-term are more likely to achieve their goals than investors who bob, weave and make changes with every short-term event.”

Ned Naylor-Leyland, head of gold and silver at Jupiter Asset Management: A victory for either Biden or Trump should be good for gold and silver

“Should there indeed be a contested outcome with litigation and delays, that would infer access to more supportive monetary and fiscal policy could be restricted for a number of months. In my view that has clear negative implications for markets. Gold would likely fall short term if a contested outcome is in play, as the risk is of a spike in real rates and a return to the volatility of earlier this year.

“On the other hand, a victory for either Joe Biden or Donald Trump should be good for the price of gold and silver. Both men would authorise a fiscal stimulus package that the country cannot afford, the Fed would be supportive, and real interest rates would likely fall further still.”

Vincent Che, fund manager at Ping An Asset Management in Hong Kong: Impact on China should be limited

“Regardless of whether the election is a Trump or a Biden win, we believe its longer-term impact on China should be relatively limited compared to that on developed markets. While we do expect the result to impact short-term investor sentiment, we think we are unlikely to see a significant change in terms of pressure on the China-US relationship.

“While we always remain mindful of ongoing macro and geopolitical developments, we prefer to focus on the strengths of the domestic Chinese economy. With many other parts of the world still struggling to recover from the impact of the Covid-19 pandemic, or suffering from ‘second waves’, China’s economy saw resilient growth following its success in containing the virus. Demand has recovered, even in the services sector, and domestic consumption and export numbers have been improving too; we expect to see continued strength in China’s economic data.”

Jim Leaviss, chief investment officer for public fixed income at M&G: No blue wave means no reversal of the corporate tax cut

“We are still awaiting the result but the most important thing for markets this morning is that there is certainly no blue wave. From what we can see, it is most likely the Democrats will take the House of Representatives, but are extremely unlikely to take the Senate.

“For bond markets, no blue wave means no hugely redistributive fiscal policy, no infrastructure boom, even if Biden gets elected. There will likely be no reversal of the corporate tax cut that most people were expecting, which will be positive for equities as earnings-per-share will be higher than it would have been otherwise.

“We have seen a big rally in 10-year and 30-year treasuries overnight, in part in reaction to the expectations of less fiscal expansion. But it also reflects the value of treasuries as safe haven bonds, particularly as we continue to have volatility around the overall result. German bunds are also doing well this morning as another safe haven asset.”


Part of the Mark Allen Group.