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US Elections: Investing Amid Political Risk


Executive Summary

Polls suggest the general mood in the US is gloomy and the electorate disapproving Trump on many key election issues, according to RealClearPolitics. Media sentiment suggests that Trump is losing ground against Biden both in the entire country and in key swing states.

There is some evidence that sectors (particularly Tech) appear to be more sensitive around the election date than cap factors and smart beta.

Investors seem to position their portfolios cautiously before elections and only venture slowly back to equities afterwards.

Macro momentum, rather than the current state of the economy, is likely to be important in the election and Trump is currently trailing past re-election winners on key indicators.

Emerging Policy Themes for 2020 Presidential Election
 

Potential Outcomes

  • Scenario A: Clean Democratic Sweep: We favour Fossil Fuel Free/ESG, Infrastructure, Health Care, dividends. 
  • Scenario B: Democratic President, Republican Senate: We favour Fossil Fuel Free/ESG, Infrastructure, dividends, Discretionary. 
  • Scenario C: A disputed Biden or Trump victory: We favour low volatility, Staples, Utilities. 
  • Scenario D: Trump is Re-Elected, Status Quo: We favour Infrastructure, Utilities, Oil & Gas, and mid/small caps.
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