How can investors prepare for either outcome of the US election
Less than two months remain until one of the most unconventional presidential elections in the history of US politics takes place. Most current polls still indicate a lead for Hillary Clinton over Donald Trump.
We’ve identified investment ideas that can shine under a Clinton presidency, others that may benefit from a Trump presidency, and a final group expected to perform well regardless of who wins the White House.
• Investment ideas for a Clinton presidency and split (democrat / republican) congress: This scenario is our base case. In general, the environment should remain supportive for US equities and investment grade bonds. We would expect a modestly positive market reaction as economic policy uncertainty fades, and markets rule out more extreme scenarios.
• Investment ideas for a Trump presidency and Republican congress: We regard this scenario as a less likely risk case. At first, the effect of a Trump victory would probably resemble that of the UK“leave” vote: gold would likely rise, and capital could flow out of the US dollar and into the Swiss franc.
• Investment ideas for either scenario: In our view, investors can weather the US election by holding more European dividend stocks (EMU, UK, and Switzerland), focusing on a combination of dividend quality and sustainability. In emerging markets, lackluster economic growth in Mexico is likely to weigh on Mexican equities and the peso. Tepid activity should persist under Clinton, and would only be exacerbated in the case of a Trump victory, as uncertainty rises about punchier protectionism.
There is little reason for investors to lean back, however.
First, the recent vote by the UK to leave the EU is a stark reminder that outcomes of popular votes can be difficult to forecast. Second, there have been large swings in US election campaigns in the past. For example, in 1988 Michael Dukakis lost by seven percentage points to George W. Bush Sr. Two months before, the Democrat had led by the same margin. And third, this US election represents the first one in which both main candidates’ disapproval ratings are higher than their approval ratings.
In our view, the disaffection with the two major parties’ nominees makes the outcome far less predictable than usual. Investors would do well to prepare for alternative outcomes.
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Hospice Liaison/Financial Coach
8y55 Days... In America, we are 55 days from the election for the next President. And based on the poll numbers and the constant political ads running on tv, this is going to be a close race. From the very beginning, this election has been dominated by economic issues. In polls, voters consistently rank the economy as their top concern. In a recent Wall Street Journal poll, just 47 percent of Democrats — and only 4 percent of Republicans — reported being “cautiously optimistic” about the economy. In the spirit of this election cycle, we thought it would be a good time to clear up a question that comes up every election cycle, “Who is better for the stock market? A Democrat or a Republican?” Our answer is and always will be: We don’t care. In a speech to nearly 40,000 Berkshire Hathaway shareholder’s last April, Warren Buffett told American votes not to worry about the market or the economy. As far as he is concerned it doesn’t matter who wins the presidency. He said the country is headed in the right direction, and “no presidential candidate or president is going to end it.” At Rich Dad, we don’t believe that a Republican or a Democrat residing in the White House determines what the markets are going to do either. If you look at the US Debt Clock, you’ll find that the U.S. has $101 trillion in unfunded liabilities. It’s not one party or administration that is responsible for it. Looking at the CASHFLOW Quadrant, which represents how a person earns their income, a person who participates in the E quadrant probably thinks they should care. People who earn their money in the E quadrant often are participating in a 401(k) retirement account so they believe that having a particular party affiliation in the White House dictates how well their investment is performing. Those with true wealth know how to make money regardless of what the markets are doing. The opportunity is the same no matter what. And really it doesn’t have to just be the wealthy. The point comes down to being financially educated or uneducated. The more you educate yourself about stocks and how money works, the less likely you’ll fall victim to the unworthy debate about Democrats vs. Republicans. This is what makes Rich Dad different. Sincerely, The Rich Dad Company
Investment Manager with a world-class track record. Visiting University Lecturer teaching Investing, Decision making and Management.
8yAnother scenario: None, but a third man - Is this an "alternative outcome" in your view?