As the US presidential election approaches in November, financial experts expect increased volatility in the stock market due to uncertainty about government policies.
The investment bank advises clients not to make major changes to long-term investment plans based solely on election results, but suggests preparing for short-term risks associated with the election. Financial experts say: We expect the stock market to become more volatile as the election approaches – and that is common – due to uncertainty about future government policies.
The bank created two buckets of stocks that could perform well depending on the election outcome: one bucket for a scenario in which President Trump wins and the Republican Party takes control of Congress, and another bucket for a scenario in which Joe Biden wins and a Congress that is not controlled by one party.
These stocks are intended to be a tool for investors to manage election-related risks and make investment decisions based on their expectations of election outcomes.
If President Trump is reelected, priorities will likely include focusing on trade agreements, imposing higher taxes on imports, and reducing business regulations. Higher import taxes could benefit domestic manufacturers in industries such as steel, lumber, aluminum, and solar panels.
Moreover, traditional energy and finance industries could benefit from a government that imposes fewer regulations. Financial experts point out that less stringent competition laws could lead to more mergers and acquisitions.
They believe that if Joe Biden wins a second term, he will likely maintain the status quo, with the possibility of raising taxes on corporations to fund government spending if the Democratic Party controls both houses of Congress, although they consider that outcome unlikely.
The bank notes that a Biden victory in a divided Congress would mean relying on presidential orders and regulatory control to move forward with climate change initiatives. Recent U.S. Supreme Court decisions limiting the regulatory authority of federal agencies could constrain President Biden’s ability to implement his policies without congressional support.
The bank cautions investors against making investment decisions based on specific expectations of election results due to the high level of uncertainty. Instead, they encourage maintaining the ability to adapt investment strategies as new information becomes available.
