The US presidential election is now just over a month away, with its outcome likely to have significant implications for global financial markets. The US not only accounts for a dominant 70% of the world’s stock market; it also represents in the region of 40% of the global bond market. As a result, most investors will have significant exposure.
John Mullane, Chief Investment Officer, Cantor Fitzgerald Ireland
Despite being in the latter innings of the campaign, the race remains too close to call and, with the market yet to have discounted a particular outcome, volatility is likely to ensue once the identity of the new president and composition of the US congress becomes clear.
Both candidates have diverging policies in key areas, with Democratic nominee Kamala Harris committing to increase taxes on high earners, corporates, and the rate applied to share buybacks, all of which would likely weigh on prospective earnings growth for the US stock market overall. In addition, the financials, big tech, and energy sectors are likely to be in the regulatory crosshairs, whilst renewables and, in particular, the homebuilding sector could be among the biggest beneficiaries as the Democrats propose constructing three million new homes over four years along with providing incentives to first-time buyers.
In contrast, a Trump administration would likely extend the 2017 tax cuts along with significantly lowering corporation taxes, which would likely be taken well by the market, albeit this could be somewhat offset by the inflationary impact of proposed tariff increases.
From a sector perspective, with the Republicans strong proponents of deregulation, both the banking and fossil fuel sectors could be significant beneficiaries. A proposed curtailment of subsidies, however, would likely weigh on the renewables sector, whilst rising tariffs would be a significant headwind to US retailers, who still heavily rely on Chinese imports.
Overall, whilst the S&P 500 has delivered a positive return in more than 80% of US election years dating back to the 1920s, the sectoral winners and losers have varied considerably. With this year likely to be no different, now presents a good opportunity to review your portfolio.
Visit www.cantorfitzgerald.ie for more information
WARNING: This communication has been prepared for information purposes only and does not constitute investment advice as it has been prepared without regard to financial circumstances, risk profile, or investment objectives.
Cantor Fitzgerald Ireland Ltd is regulated by the Central Bank of Ireland.
