US Election Result and Investment markets
Finally it has been confirmed that Joe Biden is the 46th president of the United States of America, albeit Donald Trump has lodged a number of court challenges in the rustic belt of four US States demanding a recount or to check the validity of many postal votes.
There were several surprises during the election last week including:
- The polling companies got it really wrong with Donald Trump attracting many more votes than expected especially in the key state of Florida, which he was expected to lose.
- Markets, with it being so close, unexpectedly rallied during the count. This could be attributed to:
- the prospect of Trump potentially winning
- clawback of some of the prior week’s losses – as per chart below
- the real reason though we think is that the Republicans are set to continue to hold a thin majority in the Senate and, hence, be in a position to block the Democrat agenda. In addition, the Supreme Court is now also stacked towards the Republicans and any US Presidential order could, therefore, be blocked. This would spell four years of ineffective government.
- Lack, of civil unrest leading up to and on polling day.
- Markets like certainty – if the challenge and court drag on or Donald Trump, or his supporters, don’t accept the decision he could remain in the oval office until January 20th which is another 10 weeks away.
What can we expect in the next 12 months post-election?
- More Government stimulus and infrastructure spending is a key priority given it was delayed until after the election. Given the divided government the size and shape remain highly uncertain.
- Regardless of who wins the continuation of an America first agenda and tougher stance on China
Impacts on investment portfolios
With news flow changing daily keep your long-term plan in place. Don’t make any rash decisions in the short term – remember elections come and go and economy moves on and you should base your investment decisions on that.
Looking back to 2016 and Trump’s victory – what was widely expected to be a negative for markets turned out to be quite positive. Even if you get the result right, it may not have the effect you expect. When you can’t make high conviction bets, it’s just important to be broadly diversified in a portfolio that is positioned for a variety of different outcomes and you don’t have all your eggs in one basket.
Even though the US election is dominating headlines right now many European countries have gone into full scale lock down for the next four weeks. This will have an economic impact.
Please do not hesitate to contact us if you have any questions.
Kind regards,
The Coastline Private Wealth Team.
