INVESTING
31 October 2020
Investors anticipate Joe Biden election win IMAGE: RON ADAR / SHUTTERSTOCK.COM
There is far less ambiguity for the House of Representatives – 9 in 10 investors (89%) expect the Democrats to retain control of the House, compared to 11% predicting a Republican victory.
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urvation has conducted a global sentiment survey of investors responsible for assets in US markets, ahead of November’s US elections for the Presidency, Senate, and House of Representatives. The UK pollster surveyed investor views on the likely outcomes of the upcoming elections, and the likely impacts of a range of potential outcomes: combinations of Democratic and Republican control of the White House and Congress. 91 investors were interviewed online across equities and fixed income from 88 companies in 16 countries across the Americas, Asia, and EMEA regions representing $3tn assets under management (AUM) in US markets. Fieldwork was conducted 7 – 21 September 2020.
Perceived impacts of outcomes A Republican clean sweep has the highest net positive impact rating among investors when asked about the impact of various combinations of party control on the US Dollar Index (+19%), US stock market (+71%), and US equities (+43%). According to investors, a Democrat clean sweep of the White House and Congress would have the strongest net negative impact on the Dollar Index (-55%), stock market (-46%), and equity market (-33%).
Likely outcomes 60% of investors surveyed believe Joe Biden will win the Presidential race, while 40% believe Donald Trump will win a second term. Looking at the impact on major industries, investors would consider a Republican clean sweep to be the most positive outcome for most industries (between +17% and +70%) – apart from healthcare (+5). A Democratic clean sweep would be expected to have strong net negative impacts on energy (-67%) and financials (-54%), with no net positive impact expected in any sector. Views are more split on the question of who will control the Senate after the 2020 elections, with 49% of investors predicting the Republicans will retain the upper house, while 43% expect the Democrats to gain the Senate. 9% have suggested that the elections will result in a tie – in which case, the elected Vice President would hold the casting vote in the Senate.
The survey also asked about prospective impacts on companies considered to be in the ESG sector (environment, social and governance) – here, the Republican sweep net impact is considered to be -54%. In contrast, a Democratic clean sweep had a predicted ESG net impact of +54%.
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Investors concerned about possible contested outcome of US election
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disputed result in November’s US presidential election is now the numberone concern for investors – even ahead of a second wave of COVID-19 – according to a new global survey. The poll carried out by independent financial advisory and fintech organisation, deVere Group, asked more than 700 clients: ‘What is your biggest investment worry for the rest of 2020?’ A contested US election was number one (72%), the impact of a COVID-19 second wave number two (18%) and the US China trade war number three (5%). The remaining 5% was made up of other geopolitical issues, including Brexit. 735 people resident in the UK, North America, Europe, Asia, Africa, Latin America and Australasia took part in the poll. Of the poll’s findings, deVere Group CEO and founder Nigel Green says, “Investors around the world are beginning to freak about the US presidential election. But not about whether Trump or Biden wins, rather over the looming possibility of a disputed outcome. “President Trump is already questioning the legitimacy of the election, heightening the chances of a contested result and an ensuing constitutional crisis in the world’s largest economy. It’s getting ugly and investors are, rightly, concerned that this will generate massive waves of volatility in the markets, not only in the US, but around the world.” He continues, “Investors are telling us this is their biggest investment worry for the rest of 2020. It is likely that any election-triggered volatility will be highly impactful for maybe only two or three weeks. As always, investors should remain in the market during this time.” Rational investors, Green believes, should be capitalising on any election turbulence. “There are two key reasons why investors should be building up their portfolios in volatile times. The first reason is the long-term benefits: There are many unknowns, but what we do know is that over the longer term, the performance of stock markets is fairly predictable: they go up. “Indeed, for this reason, over a longer time horizon, investing in equities is almost universally recognised as one of the best ways people can accumulate wealth. By not topping up and diversifying portfolios in volatile periods, investors are pushing back the longer-term benefits they could be starting to reap. Why forsake the long-term gains that would be generated on money invested now?” Green says the second reason is linked to buying opportunities. “The see-sawing markets are a chance for investors to put new money into markets at lower prices. A slump in the market means that there are high-quality equities available at more attractive prices.” Green adds that a contested outcome of the US presidential election will almost inevitably send the stock markets into a temporary tailspin – and this is weighing on investors’ minds. “I would argue, they should try and use the volatility to their financial advantage where possible and appropriate.”
