Scenario with investors when Mr. Trump or Mr. Biden elected US President


Scenario with investors when Mr. Trump or Mr. Biden elected US President

On Tuesday (November 3), the Americans decide who will lead the country through a period of near-unprecedented uncertainty.

For investors, who have faced continued volatility since the pandemic arrived and impacted entire industries, election day is just the next move up.

The two potential presidents have completely different plans for the future. And market watchers will also pay attention to Senate races, as the difference between a divided and unified government can completely reshape the investment landscape.

Source: Internet

How do elections affect the stock market?

While it’s impossible to predict exactly what will happen to the market, experts acknowledge some of the trends common to elections.

“The volatility of the S&P 500 is usually higher in election years than in non-election years, as markets often reevaluate the probabilities of future government policies,” according to the strategy group. JPMorgan Market Insights.

In terms of results, the market tends to react positively immediately after the Republican victory, as its policies are seen as more market-friendly.

“This is not a general rule at all. Other important geopolitical and economic events could affect the direction of the market more, ”added JPMorgan group.

Overall, a change in control of the White House has more impact than which party ultimately wins the election.

Analysts at the Bank of America say the stock market rises an average of 6.5% when a president is re-elected or if one party holds control of the White House. The average increase is only 5% when a new party takes power.

A bigger change if one side moves towards a unified government – a “red wave” or “green wave” takes over the White House, Senate and House of Representatives.

At this point, analysts say, a Republican sweep seems unlikely, while the chance of a Democratic sweep has increased.

With the ongoing pandemic and the particularly polarizing nature of this election it is likely that the market will become volatile in the near future, said Dirk Hofschire, senior vice president of asset allocation at Fidelity Investments. .

“The futures markets are pricing in the increased stock market volatility during elections, and I think a messy or prolonged result could extend that volatility into December. and maybe even January, ”he added.

What if Donald Trump is re-elected?

Among a number of plausible scenarios, it is possible that President Trump will be re-elected, in which Congress remains divided between the Democratic House of Representatives and the Republican Senate.

According to JPMorgan strategists, this scenario is considered “slightly positive” for the market. Market-friendly factors such as tax cuts and deregulation will offset the impact of ongoing trade tensions.

A report by Morgan Stanley said further deregulation would benefit the telecom and energy industries, as well as property regulators. Renewable energy, on the other hand, could face pressure during President Trump’s second term.

What if Joe Biden is elected?

The “Green Wave” means that Democrats dominate the White House and Congress is likely to create a neutral reaction in the market, JPMorgan said.

Biden’s plans to increase spending on infrastructure, clean energy and technology, healthcare and education are expected to partially counterbalance the negative effects of rising corporate tax rates.

In addition to the overall tax hike, experts at Fidelity Investments expect bigger regulations to hinder several sectors including healthcare, financial services and major technology.

Warming US-China relations may also have a positive impact on the market. A Biden presidency may be less dependent on tariffs as a negotiating tool and lead to trade growth.

However, if Biden wins the election but Democrats fail to topple the Senate, a divided government will not cause drastic movement in the market.

According to Fidelity analysts, any changes to tax and spending policies “could be subject to intervention by the GOP Senate.”

With the ongoing pandemic and the particularly polarizing nature of this election it is likely that the market will become volatile in the near future, said Dirk Hofschire, senior vice president of asset allocation at Fidelity Investments. .

“The futures markets are pricing in the increased stock market volatility during elections, and I think a messy or lingering consequence could extend that volatility into December. and maybe even January, ”he added.

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