US election: the investment winners and losers

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The waiting and relentless campaigning is almost over; during the next day or so investors will no doubt be keeping a close eye on how the US election unfolds.

The consensus view is that a Donald Trump victory will panic traders, sparking an initial sell-off for both the US stock market and the US dollar. As America's stock market, the S&P 500, is viewed as a benchmark for how other global stock markets perform, a sharp fall is likely to impact other markets, including the FTSE 100.

On the other hand, while a Hillary Clinton victory would be more warmly received by the market, certain sectors, most notably biotech and healthcare, will be in the firing line.

Trump versus Clinton: how will US stock markets react?

HUGE OPPORTUNITIES

Rebecca O'Keeffe, head of investment at Interactive Investor, our sister website, points out that the more engaged and active investor will be ringing the changes to their portfolios once the result is known (around 5am to 7am on 9 November, unless there is a recount).

'Most asset management experts advocate a long-term buy and hold strategy, and that may be a sensible course of action for many investors,' says O'Keeffe.

'However, for engaged and active investors and traders, market events such as the US election offer huge opportunities (as well as threats). As the EU referendum result showed, market moves can be short and sharp, but they may also present excellent trading opportunities for those willing to take the risk.'

Below we round up some predictions on the investment winners and losers for each outcome.

CLINTON VICTORY: WINNERS AND LOSERS

Clinton plans to raise taxes on the wealthy to finance increased government spending, some of which is likely to be spent on infrastructure.

According to Anthony Gillham, a multi-asset fund manager at Old Mutual Global Investors, this is likely to lead to lower company profit margins, but on the positive side will boost US consumption. '(It will give) people more money in their pocket - and in turn, lift company revenues,' says Gillham.

Nick Ford and Hugh Grieves, managers of Miton's US Opportunities fund, note the bond market will be a winner. The managers say: 'Clinton is seen as a known quantity and her policies are mildly redistributive and fiscally responsible. They don't rely too heavily on borrowing, and this should reassure the bond market.'

Meanwhile, James Bateman, Fidelity's chief investment officer, multi asset, picks out globally exposed UK businesses as another winner. 'As a result of the better outlook for the dollar, a Clinton presidency would likely be beneficial for UK large caps,' Bateman says.

'More widely, a Democrat victory would also represent a broad continuation of the US's global role. This would also be supportive for internationally exposed UK companies, particularly those with emerging market exposure, which rely on the relative openness on the international system.'

Healthcare and biotech stocks are the obvious losers. Clinton is keen to cut the cost of healthcare to US consumers who currently spend two to four times as much on medicine as the rest of the world.

Bateman adds: 'This has already led US healthcare stocks to sell off this year, making them cheap compared to other defensive sectors. UK healthcare stocks have yet to price in any potential danger from a Clinton presidency.'

TRUMP VICTORY: WINNERS AND LOSERS

While it is widely predicted that a Trump victory will cause panic and an initial market sell-off, longer-term corporate earnings, and with them the market, would likely march higher due to Trump's business-friendly policies, argue Ford and Grieves.

The business tycoon has outlined plans to cut corporate and personal tax. In turn, this is expected to boost company earnings and consumer spending.

David Absolon, investment director at Heartwood Investment Management, adds: 'Of the two current candidates, Donald Trump presents an unpredictable prospect and he could bring significant change.

'In the short term, financial markets will probably react negatively - but over the longer term a Trump presidency could be a boon to US assets if his fiscal stimulus plans, which are meaningful, turn out to be a positive game-changer for the US economy.'

But Trump's protectionist agenda is not likely to be warmly received. Gillham says: 'It might harm global industries whose revenues are derived from international trade, such as transportation companies.'

Even though Clinton and Trump are poles apart in many areas, they do share some common ground. Moudy El Khodr, who manages the NN IP US High Dividend fund, notes that both presidential candidates have made spending on America's ageing roads, bridges, power grids and airports a top priority.

'Major infrastructure reform would provide an economic boost in addition to job creation, and it will create a lot of opportunities both in the industrial and material sectors,' says El Khodr.

'No matter who becomes the commander-in-chief, military spending is likely to increase. We wouldn't invest in the defence sector specifically, but more expenditure will boost demand for support sectors, including some industrials and IT related to cyber security or government services.'


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