Where to invest if Biden or Trump wins? What to trade? What to buy?

Updated: Nov 19, 2020

Markets move continuously and portfolio managers and investors have been gearing up to all the potential scenarios of this election.

Biden or Trump outright win.

Narrow win for either party.

Disputed election results.

It is impossible to be correct as to the outright winner and previous opinion polls cannot be guaranteed, especially with alleged manipulation by foreign entities via social media etc, even if not proven, the Election will become politicised after the result. Trump already indicated he will contest if he loses.

Is the gap is narrowing?

Investment managers are amending their portfolios as they evaluate their exposure in the markets, trying to remain accurately positioned ahead of what promises to be a volatile US election compounded by the COVID-19 pandemic is proving to be difficult.

Most are pricing in a Biden victory as he presently maintains a lead in most the polls, although narrowing.

However, JPMorgan* says markets may be too quick in expecting a Biden presidency as narrowing odds could lead to a contested election. While Wall Street famously failed to anticipate Donald’s Trump’s victory in 2016, there has been a shift in investment patterns over recent weeks from US government bonds to equities especially tech stocks who seem to have weathered any economic downturn since Covid19.

Thousands of opinions.

“Investors are becoming more and more focused on how the election result will shape near-term fiscal policy.”

“The economy will be just fine without more stimulus — but markets could sell off sharply, says one top strategist”

“The US could plunge into a double-dip recession without timely stimulus”, economist Nouriel Roubini says.

Bank of America’s global research group said last week that a surge in solar exchange-traded funds (ETFs) reflected investors’ expectations for a “blue wave”.

“All else equal, a blue wave would likely prompt us to upgrade our [US economic growth] forecasts,” Jan Hatzius, the chief economist at Goldman Sachs, said this month.

Whatever the outcome, we will see widespread market volatility for many weeks, months or longer. For some traders, they will take advantage other investors will wait and enter when things become clearer.

There are so many issues that will influence future investment decisions because of the two candidates opposing views and campaign pledges – healthcare, Covid19,fossil fuel, green energy, stimulus, taxation, trade relations, climate change ,anti-trust actions against big tech, and a banking sector potentially facing tighter regulations ,to name just a few.

Expectations under Trump

Tax cuts and deregulation, a continuation of policies from his first term in office.

Will he continue his policy of imposing tariffs on imports to promote US-based manufacturing and the reduction of the trade deficit?

Trump is also expected to push again for a new health care system that will reduce premiums opposing Obama Care.

With regards to his energy policy, Trump has maintained his scepticism of climate change maintaining his commitment to the use of fossil fuels and fracking.

Expectations under Biden

Biden has pledged to raise taxes to boost government income considering the pandemic and the economic/social impact.

It is likely that both corporate and capital gains taxes will rise. How will Wall Street react initially?

The reversal of Trump's financial deregulation and new regulations on banking.

The investment of $2.5 trillion over four years on renewable energy.

A potential softening of trade tariffs, re-joining the climate change Paris Agreement’s.

Biden plans to bring forward plans to improve childcare & elderly care. Invest in renewable energy and move away from fossil fuels.

How will commodities react? Safe- haven’s, fossil fuels? Currencies. Stocks. Winners and losers?