On November 3, the United States held its 59th presidential elections. The current president, Donald Trump, will measure forces on the Republican side with the Democratic candidate, Joe Biden to see who occupies the White House.
The outcome of the US elections will affect everyone in all areas, including the stock market and financial markets.
How do the US elections affect the market?
It is said that the price discounts everything in the stock market and that the markets are always a few months ahead of the real economy. In other words, the behavior of the stock market reflects what investors believe will happen shortly.
And what does the market believe about the upcoming US elections? Right now, the preferred option by the market would be the re-election of Donald Trump, mainly for a matter of continuity.
With this starting point, any deviation or doubt that this scenario is not fulfilled will translate into volatility in the market. In other words, if the polls predict a Joe Biden victory, there will be more movements in the market.
How can the 2020 US election results affect the economy?
The United States is still the largest economy in the world, and depending on who governs the country will have an impact on the economy and the stock markets. We reached out to Philip Barach, a real-estate and investment management expert, who holds a strong opinion on market conditions and the impact of political scene on the U.S. economy.
Barach holds an extensive experience helping and advising companies and key individuals on the subject of money management, real estate investments, and retirement plans. He offers his exclusive insights on the likely scenario of a Trump or Biden administration in the coming years.
Democrats and Joe Biden
- International policy more aligned with Europe and with less tension, something important in relations with China.
- Promotion of companies related to consumption, infrastructure, renewable, biotechnology and health companies.
- Tech companies and those with a high environmental impact could be hurt.
The arrival of Biden to the White House would suppose a change of course in the American policy, especially in the tone and the forms. The Democratic candidate is in favor of a policy more aligned with Europe and with a lower degree of tension than President Trump has accustomed us to. This would be especially important for relations with China.
As for the stock market, the election of Biden as president would boost companies related to consumption (he has declared his intention to raise the minimum wage) and infrastructure (especially in renewables). The same would happen with biotechnology and health companies since the Democratic party has historically promoted free health measures for the most disadvantaged population.
Conversely, tech companies could be hurt. And it is that from the democratic party there has been talked on numerous occasions about limiting its size and power. But those who would undoubtedly suffer the change in the political scene are the oil and energy companies with high environmental impact, which until now have had the unconditional support of Trump.
A Trump White House
- The panorama of political tension will continue.
- Trump’s victory is the outcome the markets expect. Maintenance of a protectionist policy towards the national economy and industry.
- Conservative economic policies are to be expected, such as the abolition of Obama’s health program.
Trump’s victory is the result that the markets expect, if only for reasons of stability and continuity in economic policy. And is that if something likes investors is to be clear about what is going to happen in the future, and Trump already knows him.
If Trump wins, we will continue to experience a panorama of political tension accompanied by conservative economic policies such as the abolition of Obama’s health program or protectionist measures towards the national economy and industry.
What would a divided Congress mean?
Regardless of who occupies the White House, the elections will also serve to configure the Senate and the House of Representatives, now in the hands of the Republicans and Democrats, respectively.
What if the president is a Republican and the Congress is a Democrat or vice versa? In that case, a state of political stagnation could be reached where it is complicated to carry out any essential legislative change, something that already happened in the second term of Barack Obama.
Facing the US elections, is it a good time to invest?
Any time is a good time to invest, as long as it is done with a long-term plan, diversifying, with low costs and without trying to guess the future ups or downs. Invest in the face of the US elections? The panorama that arises until the elections and after the same until the formation of the Government is one of a possible increase in volatility. In other words, some more instability that not all investors are capable of handling.
If you are already a regular investor, the most important thing is not to make hasty decisions and to follow through with your plan. If you are not, it may not be the best time to buy stocks, but it is the best time to explore mutual funds.