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US election unlikely to drastically impact markets

T.Rowe Price US election Array

8 September 2020

| By Chris Dastoor |

Funds management

Although investors looking to US equities might be worried about the outcome of the US Presidential election, it seems unlikely the eventual winner will have a significant impact on the market, according to T. Rowe Price.

Thomas Poullaouec, T. Rowe Price head of multi-asset solutions APAC, said based on the current market activity, there was not too much concern for who would be elected.

“We’ve seen the market still rising when you had the probability of a [Democratic party nominee Joe] Biden win increasing, so that’s a sign the market was not as concerned as people would say,” Poullaouec said.

“And the market has been doing quite well during the [Republican party candidate Donald] Trump presidency, so you could say this is also something that could be supportive.”

Although there was no clear sign there would be a shock in the market, the pricing of volatility around November was still very high.

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“There’s definitely an expectation of a spike in volatility around November and that’s related to the ongoing social climate in the US with the protests and the inequality that has been increasing over the years,” Poullaouec said.

“That’s pushing this election to the extreme in the sense that partisans in the Republican party are more extreme and the partisans in the Democratic party are more extreme as well, and it’s likely to be a more heated debate before the election.”

According to data from FE Analytics, the NASDAQ 100 index had returned 676.45% since the beginning of 2008, when former President Barack Obama ran against John McCain, with Biden as his candidate for Vice President.

Obama won the 2008 election on 4 November, followed by re-election on 6 November, 2012, while President Trump won the 2016 election on 8 November.

Performance of the NASDAQ 100 since the start of 2008 to 7 September 2020

AUTHOR

Chris Dastoor

Chris is the news editor for Money Management and Super Review. He joined the Money Management team after completing a degree in Journalism while working for various community media outlets.

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