Business a.m.
Investors around the world have been given heads up in the face of the potential rematch between United States president Joe Biden and former president Donald Trump in the November US presidential election which has been unsettling investors.
Nigel Green, investment analyst and fund manager, is urging unsettled investors to stay on the fundamentals and not the political heat that seems to have made them all uncomfortable.
Green, who is the chief executive officer of deVere Group, one of the world’s largest independent financial advisory and asset management firms, said: “Investors in the US and around the world [would have watched] Super Tuesday keenly as it [gave] us insights into the perceived strengths and weaknesses of Joe Biden and Donald Trump – and one of them is most likely to be the next ‘CEO’ of the world’s largest economy.
“If the election leads to a divided government, as is the current situation, the likelihood of additional legislative gridlock is expected to mitigate any market response.
“Being monitored by Wall Street and global financial markets most carefully is the possibility of a Red Wave scenario, in which Trump returns to the White House accompanied by a Republican sweep of Congress.”
Green said as always there will be “clear sector winners and losers” if there is either a Red Wave or a Blue Wave – where Biden’s Democrats get the sweep – with historical patterns and policy preferences of each candidate providing insights into potential sectoral impacts.
“For example, a Trump victory would favour traditional energy companies, including oil and gas producers; whereas Biden has shown strong support for clean energy. Renewable sectors, such as solar and wind, would therefore likely see increased government support and investment.
“Elsewhere, Biden has expressed support for expanding the Affordable Care Act (ACA), which could benefit healthcare providers and insurance companies, but pharmaceutical companies could face more pressure to lower drug prices, impacting their profit margins.”
In a note sent to Business a.m. Green said while elections undeniably inject uncertainty into financial markets – a factor that markets inherently loathe – for the time being, investors “should keep their focus on fundamental factors.”
“Factors such as interest rates, corporate earnings, monetary policy, Federal Reserve actions, and overall economic growth will continue to play pivotal roles in market trajectories.
“By concentrating on these fundamental elements, investors can gain a more comprehensive understanding of market dynamics, irrespective of the election’s outcome.”
Green concluded by stating that the US presidential election matters for US and international investors, especially at a time when things are so polarised.
“But while elections may introduce uncertainty, the bedrock of financial markets lies in fundamental factors, and it’s on these that, for the time being at least, investors should focus.”
