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The upcoming US presidential election is shaping up to be one of the most contentious and consequential in modern history, making its potential policy and market implications front of mind for investors.
It almost goes without saying that the candidates’ worldviews are far apart, and this is evident in their policy agendas.
That said, while the tone of US trade and foreign policy would be expected to change in the event of a Biden victory, substantively, there may be more continuity than people outside the US might imagine. That’s because notions of American exceptionalism did not start with Trump; almost every US president has pursued it in some form.
The sharpest differences are in domestic policy where some close observers of US politics believe that a Biden win, alongside a Democratic sweep of Congress, could herald the largest shift in US domestic policy in decades.
All elections cause investment professionals to engage in crystal ball gazing and opine on which industries and companies may do well, and those that might run into headwinds.
Depending on the outcome, market participants believe the election could increase the likelihood of a market rotation away from companies expected to have strong earnings growth. These growth companies, especially technology companies, have performed strongly in recent years, but interest may shift toward companies in more cyclical industries that rely heavily on economic activity in the event of a Biden win.
Of course, there must be an election result and a newly elected Congress in place before any of this conjecture comes to pass. Right now, there’s anxiety in the US and elsewhere that rather than a clear-cut outcome, we could be in for political mayhem.
Investors hate uncertainty and so share markets will be an important barometer of psychology should the upcoming election be disputed. The Florida recount during the 2000 presidential battle between Democrat Al Gore and Republican George W. Bush offers a hint of what may happen if this election turns out to be messy.
That election wasn’t fully decided until a Supreme Court decision declared George W. Bush the winner five weeks after, during which the US S&P 500 Index fell nearly 10% by the end of November 2000.
Considering today’s acrimony, investors might be wise to prepare for many possibilities.
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 Here’s Why Delayed Election Results Might Not Lead To A Market Sell-Off Like In 2000. Sergei Klebnikov, September 2016, 2020 https://www.forbes.com/sites/sergeiklebnikov/2020/09/16/heres-why-delayed-election-results-might-not-lead-to-a-market-sell-off-like-in-2000/#40114c0a4243, accessed 16 October 2020.
Jonathan Armitage, Chief Investment Officer, MLC