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What Investors Should Know About the Upcoming U.S. Elections
With the U.S. election season in high gear, control of the presidency and Congress hang in the balance. We believe the outcomes of the races will have a nuanced impact on investors.
- Portfolio Construction
- Markets & Economy
- Market & Investment Trends
Key Points
What it is
With the U. S. elections fast approaching, we look at the candidates’ stances on issues and how their positions are likely to impact multiple sectors.
Why it matters
Election outcomes are one factor in a network of variables that impact returns, but investors can still prepare based on different economic scenarios.
Where it's going
Investors can take comfort in the fact that stock market outcomes have historically transcended who is in office and fundamental drivers of returns typically prevail.
With the U.S. election season in high gear, control of the presidency and Congress hang in the balance. We believe the outcomes of the races will have a nuanced impact on investors. Which factors will potentially affect portfolios? Let’s take a closer look.
We’ll start with Vice President Kamala Harris and former President Donald Trump’s stance on economically important issues, such as taxes, tariffs, regulation, climate change, and immigration. On many of these issues, there is a lot of daylight between the candidates. While we believe their positions are likely to impact multiple sectors, such as energy, financials and healthcare, history has shown that political control is not a robust indicator for sector returns. Instead, returns are ultimately driven by . What’s more, it’s impossible to know which policies will be enacted, or if unexpected factors might alter their trajectory.
The stock market has done well under both parties, and when we look at both the president and composition of Congress, there is something positive that each party can point to regarding results. But the sample sizes are small and there are a number of other drivers of return at play, so we hesitate to suggest using this as a forecasting tool. Rather, market movement is determined by a complex interplay of the economy, corporate fundamentals, and . While there is a relationship between policy and these variables, it can be difficult to attribute the effect when looking at market performance. The expected impact from policy initiatives does not necessarily translate into returns. This highlights the challenges of investing tactically.
Given the high level of passion around the upcoming elections, it’s natural to think of the potential outcomes as binary — either good or bad. In reality, though, the result is much more nuanced. Investors can take comfort from the fact that strong stock market outcomes have historically transcended who is in office. Amidst all the political drama, investors should not lose sight of the fundamental drivers of market returns. Instead, they can prepare for different economic scenarios while staying historically aware. In short, we favor .
The process of determining the value of an asset based on the analysis of variables related to investment returns or comparisons with similar assets.
In the stock market, fundamentals refer to the core financial and economic factors, such as revenue, earning, and debt levels, that determine a company’s intrinsic value.
Main Point
Preparation Over Prediction in Upcoming U.S. Elections
With the U. S. elections fast approaching, investors can take comfort in the fact that stock market outcomes have historically transcended who is in office and fundamental drivers of returns typically prevail.
Michael Hunstad, Ph.D.
Deputy Chief Investment Officer & Chief Investment Officer of Global Equities
Michael Hunstad is deputy chief investment officer and chief investment officer of global equities for Northern Trust Asset Management. Michael is a member of the Asset Management Executive Group and has oversight of all equity portfolio management, research and trading activities including quantitative, index and tax-advantaged strategies. Additionally, he assists with the development of investment vision, strategy portfolio construction and risk management framework for the firm’s broad investment platform.
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