US equity market data stretching back to 1949 shows that anyone who had restricted their investing to periods when the country had a Democrat president or to when a Republican was in the White House, would have earned a fraction of the returns enjoyed by someone who remained fully invested throughout.
At the beginning of the year, we highlighted the potential for political uncertainty in 2024, with 76 countries going to the polls in elections in which 4.2 billion people could vote, representing 51% of the global population. With heavy media coverage and many nations sharply divided, this could create short-term volatility. Given what’s happened so far, we were not too far wrong.
From an investment perspective, the US election matters most, because it has the broadest global market implications, in areas such as international trade and defence agreements.
A Donald Trump victory would be likely to raise market expectations of tax cuts and lighter business regulation while adding to concerns over higher trade tariffs. The financial services sector could be the primary beneficiary of regulatory changes, while higher import tariffs could harm US companies with global supply chains. A Kamala Harris victory would mean a US government likely to continue to support initiatives benefiting green energy and electric vehicle makers.
In the near term, market volatility should be expected due to the uncertainty of the election outcome. That said, investors should remember that US political outcomes are far from the largest driver of financial market returns or even sector performance. Economic data and expectations around interest rate cuts by the US Federal Reserve remain key drivers.
We would caution against investors making dramatic portfolio shifts based on their expectations of the election outcome or according to their own political preferences.
To sum up – we are big advocates of investing in a globally diversified portfolio and holding for the long term.
Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire, and the surrounding area, but not limited to the region.