Biden vs Trump: How the US elections impact the financial markets

We have seen a rise in short term market volatility heading into the crucial US elections next week. With a divided nation and the extremely polarising views that Biden and Trump have, what are the policy implications for the economy?

How will this impact financial markets in the US and globally? Does politics even matter? Are we likely to see a continued divergence in the economy and markets?

Our experienced investment team at Endowus will navigate the audience through financial history, market implications and how to remain anchored to time-tested and proven methods of investing for your future.

0:00 Introductions

6:48 US elections update and process

11:00 Fiscal policies differences based on Biden, Trump victory

21:26 QnA Part 1 and audience poll

26:05 How US investors react during elections, and market volatility

32:47 Does the market do better if a Democratic or Republican President get elected?

39:20 Myths on US elections and the markets

44:38 What you can do as an investor?

49:30 QnA Part 2

56:45 Endowus as your reliable digital advisory platform

58:45 QnA Part 3

Excerpts from the Session

Q: How will the credit markets be like post election? How will the FED react to the election results?

Sam: From a fiscal policy stimulus angle, which is to be decided by the Senate, we expect to see the long end of the yield curve to rise slightly, and expect to see a slight increase in inflation. The caveat is that the inflation hinges on the economy and the Co-VID situation improving. The current environment is still fairly disinflationary.

The FED is unlikely to do anything anytime soon, which is the base case assumption that most people have, regardless of whether Trump or Biden wins.

Q: How will the Emerging Markets do, specifically China, if the Democrats win?

Sam: One of the assumptions is that if Biden wins, there will be lower geopolitical risk and emerging markets do slightly better in an environment where the US dollar is relatively weak. We can expect emerging market asset classes and fixed income, and FX to see a slight appreciation.

Specific to China, the country has its own internal challenges: appreciating renminbi, a highly indebted economy. However, we can see the economy recovering very quickly since Co-VID19. Between the differences in market returns between the China and US, it will largely depend on how the trade war plays out, and the post-election tax hikes.

Q: What will happen to the ongoing trade wars if Biden wins the election?

Sam: If Biden wins the election, the inflammatory rhetoric that come from the Trump administration will die down. That may not immediately lead to a better relationship. Xi Jinping and Biden is expected to work better together as Biden, as a Vice President, had a better relationship with Xi. We expect to see US to have more stable geopolitical relationship with the rest of the world

Q: You mentioned not to time the market, even if the elections are causing the markets to be volatile. Is it still advisable to go in?

Yulin: If I have a lump sum of money, rationally, I know that I should invest lump-sum. Ultimately, I don't know where the markets will be going. If I spread out my investments and the market goes up I would regret not putting more money in. If the market goes lower I may also regret because I would think that I should not have invested in the first place. Therefore I rather invest lump sum.

For those who are a bit more conservative, they can consider spreading out their investments by putting 20% now, another 20% in another month, etc. This will help manage the overall volatility of your investments.

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