Investors, wait on the outcome of the Trump-Biden elections

MARKETS

Three weeks before the elections in the U.S uncertainty remains high - Mandruzzato: ‘Medtech and new energies favor Biden, the oil sector with Trump’

Investors, wait on the outcome of the Trump-Biden elections

Investors, wait on the outcome of the Trump-Biden elections

There are only a few weeks left for the elections, scheduled for November 3. The fight between Joe Biden and Donald Trump is fierce, and although the Democratic candidate has the advantage, no one can be sure yet about the outcome of the votes.

What predictions can be made regarding the impact on the markets?

According to many analysts, it is difficult to predict what will happen, apart from the fact that there will be less uncertainty, as the name of the winner will be known and until then, the markets shouldn’t have a definite direction. However, broadly, some indications emerge.

‘What we think - explains GianLuigi Mandruzzato, senior economist of the EFG - is that the markets will rise after the vote, regardless of who wins. History says that there is no direct link between the performance of the markets after the elections and the democratic or republican victory’.

‘Instead the interesting thing - he continues - is that for investors it is not so much who will win, but that the uncertainty about who will be the president and what policies he will pursue is dissolved. It is also necessary to see how the result of the Congress will be - that is - whether the new president will have control of both chambers or just one. In short, the variables involved are many’.

The risk of voting by mail

It also remains to be seen whether the vote by post will not provoke disputes, and therefore whether there will not be an extension of the uncertainties.

However, both presidents have an economic revitalization program. Donald Trump wants to do this through deregulation and tax cuts, while Joe Biden wants to do this through an increase in state spending financed with a tax hike, better training, the fight against climate change, and the introduction of a minimum wage. The effect of these programs on the stock exchanges is difficult to assess.

Lots of volatility

‘In recent months - specifies Mandruzzato - there has been relatively more volatility than there had been in previous months, apart from the COVID period. After the election of the president, investors will know how to position themselves and the markets will be able to resume - this also happens after the midterm elections which, again in November, two years after the elections for the President provide for the election of a part of the members of the congress and can change the balance - this also explains why the markets generally rally at the end of the year, that is, why they slow down in the months preceding the elections waiting to know the results’.

‘In general, however - notes GianLuigi Mandruzzato - the markets do not have a precise preference for one of the two candidates. On the whole, Democrats seem more careful to contain the creation of monopoly situations. And therefore small and medium-sized enterprises could be favored by the victory of the latter. Alternatively the need to contain China’s expansion there is very little differences today between Democrats and Republicans, even if the Biden administration could adopt a more diplomatic and pragmatic approach’.

Watch out for ecological issues

‘To conclude - says Mandruzzato - the sectors that should be favored if the Democrats win are those linked to climate change (such as renewable energies) and medtech. Instead, in the event of a Republican victory, the oil sector and some large-cap companies would be favored, which now have a preponderant position within the market, including in the technology sector’.

Some analysts predict that Joe Biden, who is more in favor of free trade, is better for Switzerland, a small and very economically open country.

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