13th November 2020
As the dust begins to settle on what proved to be the most well-attended US election since 1908, we consider some of the talking points for investors.
A week on from the most hotly-anticipated US presidential race in decades, we can safely say that the talk of a ‘silent majority’ of republican voters did not materialise as the incumbent Donald Trump would have wanted. In fact, despite some margin of error, the polls called this one correctly. With the exception of Florida, the result in 11 of the 12 so-called ‘swing states’ was in-line with predictions, and, at time of writing, Joe Biden has won the election with 279 to Trump’s 214 (after 46 states). Whilst we await the outcome of various recount demands and the bout of filed motions via the courts from the Trump camp, celebrations of a Democratic win continue across the world. Despite the ‘it’s not over until it’s over’ rhetoric, in reality, something must have had to have gone seriously wrong in order for any form of recount to overturn the result. As investors around the globe continue to digest last week’s events, attention will, of course, turn to stock selection – namely which asset classes will provide growth under a new administration.
Biden’s victory speech offered a flavour of his intentions for the next four years – essentially the reversal of many of his predecessor’s policies. According to exit-poll data, Trump’s much-criticised attitude towards climate change has slowly but surely become a real sticking point for voters, as has the nonchalance shown towards the coronavirus pandemic. Biden has been quick to address both issues, stating that the US will re-join both the Paris Climate Agreement and the World Health Organisation on his first day in office when he is inaugurated in January 2021. In the meantime, he has also begun assembling a taskforce to help in the battle against coronavirus – something he is entitled to do regardless of the fact Trump will remain in the White House until next year. Those across the world who feel they have sympathised with the American public over the last few years will no doubt view the changes as a much-needed dose of reality.
That said, this is a democracy, and not everybody wins. Biden’s pre-election proposals included tax increases for both high earning individuals and businesses, specifically an increase in corporation tax from 20% to 28%. Oil and Coal majors will also be ruing the change-of-tack on environmental issues. Investors will also be anxious of any introduction of anti-market policy, however, global markets have thus far welcomed the result, including our own FTSE100, which has advanced circa 13% this month already. This is partly because without a so called ‘Blue Wave’ clean sweep of also winning both congressional battles in January, the Democrats’ plans for reform will need to be pared back. The results will also be pivotal in dictating the scale of the next phase of fiscal stimulus. The highly anticipated package, thought to be worth anywhere between a further $200 billion and $1 trillion, will focus on the economic fallout from the coronavirus pandemic and could potentially benefit both infrastructure and airline industries. Should the figure be towards the lower end, the US Federal Reserve may well need to compensate by expanding its Quantitative Easing programme or by lowering interest rates further.
A lack of a majority in Congress might see trade talks between the US and allies such as Canada and the EU strengthen further, particularly in a bid to keep the threat of China’s economic development at bay. At the eye of the storm will be large pharmaceutical and technology companies, who, in the past, have fallen out of favour with the President-Elect. However, with promises of both lower-priced medication and broadband access for all, relationships will need to be handled with care. Closer scrutiny of major financial institutions and the tightening of regulations may also be up for discussion. One thing that is clear though, is that, even with a lack of Congress majority limiting his ability to implement change, the decision to re-establish the US’s commitment to a net-zero carbon target is significant, and will likely boost prospects for Socially Responsible Investment globally. Closer to home, there is mounting pressure for our own trade deals to be agreed, and with Biden’s Irish heritage, there is some doubt over how realistic a swift US/UK trade deal will be agreed. That said, as global asset allocators, it is important that we are able to look-through any short-term volatility that presents itself as a result. We continue to remain focused on investing in quality-driven businesses, with a medium to long-term outlook.
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