Tag Archives: U.S. election

Don’t mix Politics & Investing but financial community thinks a Trump victory more positive for Stocks

Top investment executives told a webinar held Wednesday morning that investors should not mix Politics and Investing. Even so, while market observers at Franklin Templeton view the upcoming U.S. election as essentially a “toss-up” they seem to believe that a victory or sweep by the Republicans’ Donald Trump would be more positive for stocks than a Kamala Harris win.

Grant Bowers, portfolio manager and Senior Vice President for Franklin Equity Group, said “it’s a 50/50 tossup for the presidential winner. Both candidates are well known so it’s not surprising” there’s been little market volatility in the runup to the November 5th election. Generally, he’s bullish no matter the outcome.  The economy did well in Trump’s first term while a Harris victory would be a continuation of Biden policies. The real differences are on tariffs, fiscal policy and regulation. “The most likely outcome is a split government” but there would be more volatility if there is a sweep by either party.

Of course, it’s quite possible that investors won’t know the official outcome for several weeks. If the process of counting votes drags on and there are legal challenges like there were in 2020, investors can expect more protracted volatility.

Sonai Desai, Chief Investment Officer for Franklin Templeton Fixed Income said the U.S. economy is set to do “quite well. I agree there’s a reduced probability of Recession: that’s not our baseline for a while.” If there’s a Republican sweep and broader tariffs measures introduced by Trump, “that might limit the Fed’s appetite for massive rate cuts.”  Her baseline is that even with a Republican sweep, there won’t be a literal imposition of tariffs: that didn’t happen in 2016, so “I don’t think we will get the full range of cross-the-board tariffs.”  Either way, the mighty U.S. consumer will “continue to consume and I don’t see that changing with the Election.”

Clearbridge’s Jeffrey Schulze

In the very long run, of course, any short-term market volatility from elections is likely to be a blip, which is why Franklin Templeton tells clients not to mix investing and politics.

In an analysis released early in October, Clearbridge Investments Head of Economic and Market Strategy Jeffrey Schulze, CFA, showed the following annual returns for the S&P500, all positive for equities no matter which party wins and whether or not they get full control or are in a divided government. Based on that, the best outcomes for investors would be a Democratic president with a Divided Government or Full Control by a Republican president.

“We view a Trump win, likely coming in a sweep scenario, as net positive for equities as it preserves favorable corporate tax treatment and builds on tax elements that expired,” Schulze wrote in the October 1st update, “A Harris win, likely coming with a divided Congress, would be mildly negative due to fewer provisions of expiring tax legislation getting extended due to political gridlock.”

Trump win likely positive for Stocks

“In aggregate, we view a second Trump presidency under a sweep scenario as net positive for equities. The expectation is for a more favorable corporate tax regime and less of a regulatory burden, both of which should boost corporate profits. Conversely, there is the potential for increased tariffs and retaliation from U.S. trade partners … We view U.S. stocks as best placed under Trump, with banks and capital markets, as well as the oil and gas complex, well positioned due to lighter regulation. Aerospace and defense is also likely going to benefit as well as biopharmaceuticals. Areas that could see pressure are restaurants and leisure, due to the less availability of labor, as well as EVs, autos and clean energy producers.”

Harris win might be “mildly negative” for Stocks

A Kamala Harris win would be less positive for U.S. stocks, Schulze writes: “We see a Harris win as mildly negative to equities should she preside over a divided Congress. It will be more of a headwind to the markets should we see a Democratic sweep as she will then be able to implement higher taxes on corporations and high-income individuals, as well as push a more ambitious regulatory agenda. However, tax credits for low-income individuals would provide an offset, creating an economic boost to this segment of the economy.Tighter regulation could weigh on biopharmaceuticals, banks, capital markets, energy as well as mega cap technology. But again, we caution against basing investment or portfolio positioning solely on the regulatory environment. Areas to be bullish about under Harris would be consumer discretionary, specifically restaurants & leisure, home building and building products.”

Generally, Franklin Templeton continues to advocate a “stay the course” stance for investors geared to the long term. The chart below shows that going back to 1944, the U.S. stock market has risen steadily over time regardless of which political party is in the White House.

 

 

Stephen Dover, chief market strategist and Head of Franklin Templeton Institute, acted as Moderator in Wednesday’s webinar, fielding audience questions. He also wrote a U.S. election update earlier this month, headlined “Uncertainty Reigns.”

He concluded back then that the election remains  “too close to call. A divided government in Washington, DC, with no single party controlling the White House, Senate and House of Representatives is likely … Investors should gird themselves for uncertainty and potential bouts of volatility preceding and following election day. It is quite possible that the outcome for the presidency will not be settled until the December 17 certification deadline.”

Dover expects market uncertainty to continue well past November 5th, if not until January’s inauguration of the ultimate winner.”Legal challenges, some of which have already commenced, add to uncertainty. Re-counts, delays and disputes over certification of results, alongside courtroom litigation are virtually assured if state election outcomes are close. Various legal and procedural challenges are likely to endure until at least December 17, which is the deadline for state certification of the presidential election results and the official nomination of state electors to the Congressional certification on January 6, 2025.”

However, Dover says his basic investment conclusions remain unchanged. They are as follows: Continue Reading…

Investing in the Aftermath of the Trump victory

image005By Kara Lilly, Mawer Investment Management

Special to the Financial Independence Hub

Donald Trump became the 45th president-elect of the United States last night. The businessman beat former secretary of state, Hillary Clinton, ending what has been a long and salacious presidential campaign. The GOP also kept control of both the Senate and the House, leaving the fractured party with room to implement its policy platform.

Markets were relatively calm today despite the knee-jerk selloff that was triggered by the impending victory last night. Equity indices have steadied and volatility indices have fallen as market anxiety has tempered. The greatest impacts so far appear in the bond and currency markets. Yields on longer term U.S. government bonds have risen amid wagers of higher spending. Meanwhile, the Canadian dollar and Mexico peso have sunk on concerns of unravelling economic integration with the U.S.. Within equities, pharmaceutical stocks rose as investors unwound bets that a Clinton win would usher in greater regulation.

No meltdown but still a significant investing event

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Investing for the Trumpocalypse; Review of Trump bio, Never Enough

trumpbookEditor’s Note. The Hub originally ran the book review that appears below last February but in light of last night’s shocking defeat of Hillary Clinton by Donald Trump, it seems timely to rerun it now, when the world is thinking of no other topic.

In the meantime,for the possible financial implications of the Trump victory: see my FP blog today on what investors should do in light of the feared “Trumpocalypse.

In brief, and as I noted in my Twitter feed last night, those overweight stocks could reasonably have expected a major plunge on the major US and stock indexes at this morning’s open. Markets elsewhere started to plunge as soon as the historic result became clear well before midnight. However, this did NOT occur once the American markets opened at 9:30 this morning: instead, US markets were mostly positive almost from the get-go and by the close, the Dow Jones Industrial Average was up 257 points, while the Canadian market was up more than 100 points.

Things could change over the coming days but as always diversification and asset allocation offers a degree of protection under such uncertain conditions. Those with cash, gold or precious metals, bonds, real estate and who are in some way partly hedged by being short certain equity ETFs should find themselves partly cushioned should markets go south. 

The unexpected election outcome was predicted in certain circles: documentary maker Michael Moore and currency expert James Rickards come to mind. But of course, very few would have heeded these warnings, so unbelievable did this outcome appear. While the expectation was that Clinton was good for markets and Trump was not, Wednesday’s market action confounded this notion. Still, if you’re an investor, definitely consult your financial advisor. 

I’d argue that if you didn’t take steps to hedge against this outcome before, the horse has already escaped the barn and it may be best to sit aside, try not to panic and wait for things to stabilize in a day or two. If you’re with a robo-adviser service, hopefully your asset allocation reflects your true investment personality and no major actions should be necessary. 

As advertised,  here’s the (very short) book review, as I originally wrote it:

Book Review: Never Enough — Donald Trump and the Pursuit of Success

The title of Michael D’antonio’s new biography of Donald Trump — Never Enough: Donald Trump and the Pursuit of Success — was enough to get me to order the book from the library and read it from cover to cover. After all, I was a big fan of John Bogle’s book with a similar but diametrically opposed title: Enough.

Perhaps my view of Donald Trump was long coloured by my late mother’s assessment that if I ever turned out like the Donald, she’d disown me, or words to that effect. After all, Trump epitomizes the main worldly goals of our era: his career was all about pursuing the holy triad of fame, money and power: in that order. And add a fourth, his admission that his main vice has been sex, even though he was largely an abstainer from other popular vices like drinking or drugs.

The original Wealthy Boomer

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