Historical data shows that previous appointments have had a significant impact on financial markets.
With the US presidential election fast approaching, the question is what impact a second term for Biden or Trump could have on the markets. In the livestreamVontobel experts analyzed possible market developments for both election results and showed which sectors could benefit depending on the election outcome.
Generally speaking, elections in the United States tend to affect not only the population, but also the markets. Thus, historical data shows that previous elections have had a considerable impact on financial markets.1. It is impossible to predict whether this will happen again in the future, but it may be worthwhile for investors to adjust their portfolios accordingly.
Investing early during the US elections can be tactically advantageous for several reasons. Elections often bring uncertainty and volatility to the market, leading to short-term price movements that investors could exploit. In addition, certain sectors or companies are more or less affected by the political or fiscal measures of the respective parties. This allows investors to take early positions in sectors that are likely to benefit from political changes.
Two candidates with different political agendas
The distinctions between the two parties’ platforms lie in the details. Donald Trump’s platform, whose campaign is often called “Agenda 47” in reference to the 47e upcoming presidential election, feels like an updated version of “Make America Great Again.”
Joe Biden, for his part, considers that his mission is not yet over with his “Let’s get the job done”. If we look in detail at the individual thematic blocs, we see, in addition to the points mentioned above, major divergences between the two parties in the areas of foreign policy, domestic policy and climate policy.
«America First» de Trump
Trump’s plans for rebuilding the largest economy in history aim to strengthen and modernize the United States through various measures. These include tax cuts, promoting economic activity, restoring supply chains, strengthening border security, and creating new jobs. In addition, the United States’ global energy dominance must be strengthened. Fossil fuels must be used more, withdrawal from the Paris climate agreement is in talks, and the government plans to eliminate government subsidies for wind turbines and end the “green revolution” (Donaldtrump.com).
«Let’s get the Job done» de Biden
Joe Biden’s policy agenda is more moderate and continues to develop the existing measures of his current term. These include the development of infrastructure and technology, increased public spending on education and health and taxes for the wealthy and large corporations as well as a more flexible immigration policy. If Biden remains in office, this should also lead to increased investment in renewable energy and infrastructure as well as stricter regulation of conventional energy producers (Joebiden.com).
Effects on markets
The past has already shown that the election results of the winners can have an impact on the markets. For example, the different programs desired by the presidents could favor certain sectors – and therefore certain companies. This could in turn influence the share prices of certain companies. The race remains exciting and it is not yet possible to know who will emerge victorious from the elections. But whoever wins, the markets should react accordingly and offer investors attractive investment opportunities.
Different indexing strategies for different scenarios
Vontobel took advantage of the US elections to develop different index strategies that identify companies likely to benefit from the election outcome: the Vontobel Democrat 2024 US-Election Index and the Vontobel Republican 2024 US-Election Index.
With the tracker certificates on the respective indices, investors have instruments at their disposal that enable them to invest easily and in a single transaction in companies that could particularly benefit from the outcome of the US elections.
Both indices include companies that generate a significant share of their revenue in sectors that could particularly benefit from the different political agendas of Democrats or Republicans. Each index includes twenty companies selected according to their market capitalization in the relevant sectors. In addition, ten companies may be included in the index that, although smaller, are particularly active in the respective sectors.
1NZZ, 05.06.2024.
