With less than a month to go until the ballot opens, investor attention is increasingly focused on the US presidential election.
With two very different characters running for the White House, and with US politics deeply divided along political lines, interest in the outcome is understandable. However, we suspect that – for the most part – voting on 3rd November will have much greater significance politically and socially than it will from an investment perspective.
While there is much to differentiate the policies of Republican Donald Trump and Joe Biden, his Democratic challenger, there are
also a number of similarities. From a cold-hearted investor’s perspective, one particularly important common agenda is the intention of both candidates to unleash additional government spending to support the US economy. True, the scale and shape of this support differs – Trump’s plans emphasise business-friendly tax cuts while Biden’s focus on social security – but the objectives are the same: to cement and accelerate the economy’s recovery from its Covid-induced recession.
Undoubtedly, of course, there is devil in the detail. Four more years under President Trump, with his low tax agenda and antiregulatory instincts, would likely be welcomed by Wall Street. Furthermore, though his first term has been marked by unpredictability and opportunism, a second term for Trump nonetheless represents continuity, a condition investors tend to
prefer over change. On the other hand, while the scale of Biden’s proposed economic stimulus should be welcomed by stock market investors, the prospect of tighter regulatory standards and higher corporate taxes may mean a Democratic victory is initially met with a degree of wariness.
Beneath the headlines, the election outcome may have a material impact on specific sectors of the economy. As ever, healthcare
is set to be a key battleground. While Trump wishes to dismantle the Affordable Care Act – a cornerstone of Barack Obama’s legacy – Biden supports its expansion. The fortunes of healthcare providers, insurers and drug manufacturers are heavily dependent on which approach wins out. The same might also be said of industrial sectors, particularly car manufacturers.
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