With just days until the U.S. decides its president, the market is starting to anticipate a Trump victory without major hesitation.
Despite the short-term market volatility around elections, U.S. equity performance tends to be fairly “indifferent” to which party takes the White House, especially if Congress remains divided. As a starting point, it seems somewhat “pointless” to link a market outlook to a party aspiration, says a Fynsa report.
Generally, markets have risen under both Republican and Democratic presidents, and the reason is that “markets simply go up, and over 100 years of modern history, the compounded annual growth rate is practically identical under presidents of both parties,” adds the study.
However, some sector-specific impacts can be observed depending on the candidate. For example, Republicans would focus on deregulating the economy and creating a positive fiscal boost from tax extensions.
Trump could replace Jerome Powell, potentially leading to unpredictable changes in Fed policy.
There might also be a higher risk of increased tariffs against China and moderate risks against global tariffs. Mega-cap stocks could be affected by higher tariffs, given the additional costs arising from relocation and potential Chinese retaliation against these control measures.
But, overall, highly regulated industries such as healthcare, energy, and the financial sector are potential relative winners under a Trump presidency.
On the other hand, the economic policies and measures proposed by both candidates are likely to contribute to an increase in the fiscal deficit, although experts at Fynsa expect the deficit to be larger under Trump. “The most bipartisan thing in the United States is that public spending keeps growing. The national debt was $19 trillion when former President Trump took office and $28 trillion when he left. And the Democrats have added another $7 trillion to the debt,” the report adds.
Looking Toward Year-End
The third quarter will continue to be a test for big names related to artificial intelligence, according to a report by Sarah Stillpass, Global Investment Strategist at J.P. Morgan Private Bank. In line with Fynsa, Stillpass does not believe that the elections or Middle East unrest are reasons to dismantle long-term plans.
“We believe the most important implications are those resulting from policies after the elections, and it’s important to recognize the difference between a short-term operation and a fundamental trend,” says the J.P. Morgan report.
For these reasons, with just under 70 days until year-end and just over a week until the next FOMC meeting, the U.S. bank provides a series of recommendations for investors.
First, the expert recommends identifying goals and creating a long-term plan for effective portfolio maintenance. “Just like medical check-ups, regular portfolio reviews are equally important,” the bank’s text notes.
Economic and market dynamics can shift both short-term and long-term, which can lead to unexpected impacts. For this reason, it’s important to review your target asset mix and consider the possibility of rebalancing.
Secondly, “it’s crucial” to maintain a long-term perspective and focus on fundamentals. Remember that markets tend to record gains regardless of who is president. If market uncertainty causes doubt about your portfolio allocation, take it as an opportunity to review your goals and plan.
Lastly, the strategist recommends using available tools to improve portfolio efficiency. “Integrating technology and innovation into investment strategies can enhance portfolio performance in the long run.” For example, artificial intelligence, “which can improve the active portfolio management process by allowing managers to gain a competitive edge through better data analysis and faster decision-making.” Additionally, this technology can improve more traditional strategies, such as tax-loss harvesting, which involves realizing losses to offset gains, concludes the expert.
