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Risks and Opportunities of the US elections

The US presidential election – set to conclude on the 8th November – has rapidly evolved into a fluid, fast moving landscape filled with political uncertainty. With the third and final presidential debate concluding earlier this month, opinion polls around the world have been split, with even the most experienced political analysts torn between a democratic or republican victory. As such, we anticipate significant potential for increased market volatility over the coming months as the election is decided.

When we look toward the post-election environment, general perception appears to be that a Democratic victory will have limited policy changes and a relatively stable aftermath, leading many bullish investors banking on a Clinton win. In contrast, a win for the Republicans will result in more dramatic, volatile shifts in US policies – leaving most bearish investors looking toward a Trump victory.

An expected increase in the budget deficit means US bond markets are set to weaken if Trump gains a seat in office. As a result, the US dollar has the potential to be pushed much higher. A Clinton victory on the other hand is unlikely to deviate from the current policies and procedures, and the status quo is predicted to be maintained.

When it comes to US real estate investment trusts, a Clinton victory alongside a Republican majority in Congress will likely result in little to no change in the volatility of the market. A Trump victory on the other hand could see very select areas performing better but with no guarantees.

Incredibly both candidates agree to increase spending on US listed infrastructure, which is expected to drive short-term share price gains. Defence spending is also forecast to increase regardless of which candidate emerges victorious.

As with all major elections, an increasing amount of volatility on the stock market is certain to be realised. If history is any indication, the month of October in any election year is often met with the highest amount of equity volatility than any other month during the election cycle. A lasting impact on the liquidity of fixed income and equity markets is not expected to last as a result of the election changes however, so investors can rest easy for the most part.

As always if you have any questions or concerns about how global events could affect your income, wealth or investments, please get in touch with one of our experienced financial advisors.

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