By Alistair Gray
ONE of the most significant “known unknowns” of 2024 is nearly upon us, with US voters heading to the polls on November 5. As it stands, with less than two weeks until election day, polls show the race for the White House is too close to call. With the closely contested election, volatility on stock markets may be elevated, which leaves many individuals wondering how it will impact their finances.
We see many pundits attempt to predict how the election outcome may impact the economy and financial markets. However, the reality is that there are too many variables and unknowns to reliably predict what could happen over the next few months, and focusing on the many possible outcomes can be an inefficient use of time.
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The next president’s ability to implement changes will be impacted by the breakdown of the US Congress, where single party control would make implementing any changes easier than a divided Congress (e.g. Republicans taking the Senate and Democrats the House), which is what the markets appear to be discounting.
A divided Congress could also make it challenging for the winning party to follow through on the promises they have been making on the campaign trail.
Where investors should pay attention is the potential for new legislation or significant regulations that could change the path of growth in the US and potentially impact the future direction of the world economy.
What is likely more important than the election is the general outlook of the global economy. In periods of high economic growth, the outcome for investors is likely to be positive compared to a recessionary period, regardless of the domestic policies. We have seen historically that economic growth is what tends to drive markets in the long run even though it is the elections that dominate the headlines in the news.
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We believe following a tried-and-tested investment philosophy is the best way for investors to grow their wealth, which means getting invested and then looking to make changes when you can see an opportunity. At the moment, trying to predict the result of the presidential election, in addition to the results for Congress and the market reaction to potential outcomes, looks an impossible task. We believe investors who put money to work in a well-diversified portfolio can often benefit in different market conditions and can make it a smoother journey overall.
In conclusion, it is important that investors are sceptical when someone claims to be an expert in predicting the upcoming US election and the impact it will have on markets, the economy, and investors.
It is a highly unpredictable event, and the impact of the results can be even more challenging to predict with certainty. Of course, the event could bring short-term volatility, but in our view investors should remain focused on their long-term goals, stay diversified, and remain vigilant.
Alistair Gray is Wealth Manager, Barclays Private Bank & Wealth Management
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