Wellian Weekly 09.11.2020

US election and what it means for investors

With the US election heading down the final straight the short-term outlook is still one of uncertainty. With the election being held last Tuesday and a few states yet to declare a final result, President-elect Joe Biden took victory over the weekend, although Donald Trump is yet to concede, meaning there is also a growing likelihood of a legal fight lasting several weeks afterwards to decide who is formally going to be elected President.

Judging by their speeches to supporters, both Trump and Biden are claiming victory even though millions of votes are still uncounted. Trump’s claim rests on being ahead in votes physically cast in ballot boxes on the day in the critical states like Pennsylvania, while Biden’s is on being ahead once postal votes are counted in the coming days.

With such uncertainty, investors may have to belt up and brace themselves for some volatile days and weeks ahead. So far, investors seem to be adopting a wait and see approach. However, it is likely to be many more hours and possibly days before all states tally all the ballots. With uncertainty the name of the game there are signs some investors are ploughing back into perceived safe haven bonds.

Each state has varying rules, but it is clear the Republicans will take this to the Supreme Court arguing, for instance, that votes in Pennsylvania received after polling day – but apparently posted before – should be discounted. This is what Trump means when he claims people are still voting. It is not true, but it does have an element of truth he has exaggerated.

However long it does take before a winner is formerly announced, under the Electoral Count Act, 14 December is the date by which Electoral College votes must be announced at a state level, while under the Constitution, a President must be sworn in on 20 January 2021. That is the hard stop date.

While we can make guesses about who will win an election, and then more guesses about how the stock market will react, that's not normally a good idea. Not being invested in the US would have hurt investors’ performance in the past, but that does not mean investors should overdo it and have too much invested here moving forward.  Investors should also consider their own time horizons and having a balanced and well diversified portfolio is always a good idea, especially in uncertain times. That means no matter who gets into the White House, or which industries flourish, you could stand to benefit in the long run.


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