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5 ways the election could impact your US investments
With the Biden v Trump election just around the corner, investors in the US market need to watch out for a host of possible scenarios in the event of a changing government, an industry expert has flagged.
5 ways the election could impact your US investments
With the Biden v Trump election just around the corner, investors in the US market need to watch out for a host of possible scenarios in the event of a changing government, an industry expert has flagged.
First Sentiers’ head of investments North America, John Ma, and senior portfolio manager Jason Epstein share the themes investors should look out for following the election.
1. A ‘blue wave’ win could spark a progressive policy push.
Investors could see a so-called “blue wave” win in the November election – where Biden becomes president and the Democrats win the majority in the Senate which could see progressive policies pushed through.
“Some of the policy areas already flagged in Biden’s campaign include tax rates, healthcare, infrastructure spending, climate change policy, education and housing,” Mr Epstein said.
2. Stimulus funds will flow freely – regardless of the winner.
Regardless of the winner, investors in the United States should expect a large-scale stimulus package to hit the economy.
Mr Epstein said, “There will be a tremendous level of fiscal and monetary stimulus, combined with the prospect of a new stimulus bill and the idea of a Fed ‘put’ for the foreseeable future.
“The real question is how sustainable that approach is. Will it continue to underpin markets, or is there a breaking point?
“There are also questions about how it will impact the US dollar, and if the US dollar will retain its place as the leading reserve currency.”
3. China relations remain under pressure.
The fund managers predicted that regardless of who wins the election, both sides will have a tough stance on China, which could impact sharemarkets.
“A tense relationship with China is likely to be the new normal, regardless of who’s president. Biden is looking to make the US competitive with China and to bring jobs back to US in areas such as automotive manufacturing. The goal is to have strong domestic production capabilities that reduce their reliance on China,” Mr Epstein said.
4. Infrastructure will remain a local affair.
Mr Ma said it’s important to recognise that the infrastructure market is predominantly under state and municipal control, rather than federal.
“The White House has less direct ability to influence outcomes in the infrastructure sector. While funding can be allocated to the states at a national level, it’s the states and cities who mostly choose how to deploy the funding. As such, the election is unlikely to have a big impact on specific infrastructure projects.”
It is possible, however, that governments prioritise short-term job creation.
“In the wake of the 2008 recession, Federal stimulus funds were focused on ‘shovel-ready’ projects that would create jobs immediately. It was a missed opportunity for bigger, more ambitious projects. Hopefully, we don’t see the same phenomenon play out this time,” Mr Ma said.
5. Democrats would give renewables a boost.
One area of clear differentiation between Biden and Trump is the Democrats’ emphasis on renewable energy.
“The more progressive elements of the party put forward concepts like the Green New Deal during the primaries season, and this has informed Biden’s policies.
“It’s likely Biden would be a net positive for the renewable energy sector, which is already experiencing strong tailwinds. While power generation is controlled locally and regionally, a Democrat administration is likely to put an emphasis on clean energy through levers like tax credits,” Mr Ma said.
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