The latest US Election polls show just a 1% difference between the likelihood of either Kamala Harris or Donald Trump winning the race to the White House.
With an election result that’s too close to call, what does it mean for investors looking to invest in the US market?
This article is not personal advice. If you’re not sure an investment is right for you, ask for financial advice. Investments, and any income from them, will fall as well as rise in value, so you could get back less than you put in. Past performance isn’t a guide to the future.
What impact will the US election have on stock markets?
The short answer is that it’s too difficult to position the market’s response to the election, given it’s such a close-run race.
We can, however, take some cues from what we know about the two candidates’ time in office so far.
Donald Trump’s presidency was received positively by the markets overall. This was thanks to some corporate-friendly policies.
However, his style of presidency caused some volatility. This often came down to the market’s tendency to focus on Trump’s social media announcements.
It’s difficult to interpret the logic and detail of an announcement made via a Tweet and we know that the market doesn’t like uncertainty, so this created volatility.
Meanwhile, a Harris administration could be seen as an extension of the Biden administration she currently serves under as Vice President.
Markets have grown under Biden and, although there have been wobbles, have reached record levels under his administration.
However, this time around, either Harris or Trump will be inheriting record levels of US deficits. This means their room for manoeuvre when it comes to government spending and tax is more restricted.
The two candidates have different policies.
A Trump presidency will likely see more ambitious spending than a Harris presidency, whose spending plans she says would be funded by tax increases for corporations and the wealthy.
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Which sectors could benefit following the election?
We’ve seen that Donald Trump is more supportive of sectors like technology and cryptocurrency.
We also know from his first presidency that his ideals involved reducing the burden of regulation. This could be perceived as more supportive for businesses.
Meanwhile, if a Harris administration is indeed an extension of the current Biden administration, we could see a less favourable reaction from technology companies.
The current administration has been clamping down on companies in this area, with Alphabet (the owner of Google) facing antitrust trials brought by the US Department of Justice.
Elsewhere, Harris wants to expand renewable energy projects like wind and solar, while Trump has consistently championed the fossil fuel industry, advocating for deregulation to boost oil, gas, and coal production.
What could the US election mean for global markets?
One area where Trump and Harris seem aligned is their ‘America first’ approach, defending local manufacturing and businesses.
Another shared value is a relatively tough stance on China, although Donald Trump takes a more extreme view on how to deal with competition from Chinese companies.
Trying to predict the impact of a potential trade war or tariff exchanges with countries like China is difficult. A lot depends on how other countries react to US foreign policy under the incoming president.
During the trade war with China under Trump’s former presidency, we saw additional inflation within the US but no major impacts on global trade.
Where there could be real uncertainty is in areas like US foreign policy with countries like Russia.
Kamala Harris is likely to take a tougher stance with Russia, whereas we know from his former presidency that Donald Trump is likely to be more engaged with it. This has potential knock-on effects for Europe and its energy policy, after it shifted its reliance from Russia to the US for its energy supply following Russia’s invasion of Ukraine.
2 fund ideas to help navigate stock market uncertainty
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund including its risks and charges, use the links to their factsheets and key investor information.
Want to invest in the US stock market?
With so much hanging in the balance, investors could be forgiven for shying away from the uncertainty around the US.
However, while elections can bring volatility in the short term, investing for the long-term is your best chance of success in the stock market.
HL US Fund
Diversification across industries and sectors is a key approach to our style of investing. This can help create a buffer against the ups and downs that specific areas might experience under potential future administrations.
We’ve handpicked external fund managers who we believe offer the best potential for long-term performance.
The external fund managers manage their own portions of the fund and we’ve given them clear boundaries on how to run them following their tried and tested strategies.
Our big focus is on the fundamentals of the companies they invest in. This is what will sustain and deliver a much better outcome rather than focusing on specific events which could trigger volatility.
The fund can invest in faster growing smaller companies where it sees potential, but this increases risk.
Our recipe for long-term performance is a focus on the long term and the fundamentals of investment opportunities.
This fund aims to invest in US shares for long-term growth. And could be used by people who are comfortable building their own portfolios. It could fit well in a portfolio that would benefit from exposure to the US.
Looking for a way to invest around the world?
While US-based investments should play a role in most all portfolios, it’s important for portfolios to be globally diversified too.
Spreading your investments across different parts of the world, sectors and industries makes you less dependent on one area to perform for you.
NEW – HL Global Equity Income Fund
Our NEW HL Global Equity Income Fund is a globally diversified investment.
With a single fund, you’ll get access to worldwide investment opportunities, including higher risk emerging markets. It’s run by HL’s expert fund management team, who’ve handpicked external managers they believe are some of the best global equity income stock pickers in the market right now.
The team have blended the investment styles of these external managers so the fund’s positioned to perform well in a variety of conditions. It could be used by investors who are comfortable building their own diversified portfolio of investments.
HL funds are managed by Hargreaves Lansdown Fund Managers Ltd., part of the Hargreaves Lansdown Group.
Ziad discusses the US election with HL’s Head of Platform Investments, Emma Wall, on the latest episode of the HL Switch Your Money On Podcast.