Many of us watched the US Election unfold with bated breath as we waited to hear whether the American public would re-elect President Trump or look to a new path in light of increasing tensions globally and at home.
Although events dragged on for some time after Election Day, once the results were in, the ASX rallied in response to the promise of increased stability in the White House. Here’s what the US election results could mean for Australian investors.
Stability a key factor
With President Trump at the helm, we saw some increased volatility as it was hard to predict what would come next. Just one late-night Tweet could have the power to increase trade tensions and impact financial markets. Because we expect a very different leadership style from Joe Biden, some of this uncertainty is likely to be abated.
Adding to the stability for investors is that while the Democrats hold the lower house, it is likely that the Republicans will retain a Senate majority. This means that some of Biden’s policies that have the potential to negatively impact markets, such as tax reforms, are less likely to become a reality.
Trade tensions remain uncertain
As Australia currently negotiates its relationship with China, an easing of the tensions between the US and China would likely play an important role in the situation here at home. And while it is anticipated that the Biden Administration will work towards reducing global trade tensions, particularly with China, investors will need to keep a keen eye on Trump’s movements until the transition.
With Trump remaining in the White House until January 2021, there are some valid concerns that he will not make the transition easy. There is some speculation that he will escalate trade tensions in the ensuing period, potentially leading to increased market volatility in the short term and a longer road ahead to repair the relationship following Biden’s Inauguration.
Some commentators are also tipping that President Trump will continue on a path of firing people in key official roles, and this may also have an impact in the short term.
Stimulus may improve US economy
A big part of Biden’s platform has been increased government spending, in areas such as healthcare and infrastructure. While some of this will likely be vetoed if the expected Republican Senate majority comes to pass, we should still see some improvement in the US economy.
Some Australian companies with US operations, such as those who operate toll roads, may be in line to see a lift as spending increases, but it is still a case of watch this space as we see what unfolds.
Don’t overestimate the impact
For Australian investors, the combination of a Democratic lower house and the anticipated Republican Senate really means that not much should change. More co-operation between China and the US could be a win for Australia but we also have our own path to negotiate when it comes to relations with our biggest trading partner.
While the US does play an important role in the global economy, it’s important to remember that equity markets have continued with normal daily trading throughout the election, so politics haven’t had a significant impact, and that’s what markets – and investors – really want to see.
Watch this space
With run-off elections happening in the state of Georgia expected to take some time to yield a result in terms of the Senate, it’s still very much a case of watch this space. And while the anticipated results of a Republican Senate majority should mean its business-as-usual for most sectors, there are still some unknowns.
As with any investment decision, it’s important to get advice that takes into account your situation and goals, so if you have concerns that the result may impact your portfolio, it’s best to get in touch with your Apt Advisor.
If you want to keep informed as events unfold, Apt’s monthly Market Update is a great way to do so. Each month, the Apt Investment Team apply their expertise and liaise with top research houses across the country and the world to summaries the previous month and highlight what to watch in the month ahead. The update goes to the subscribers of our newsletter, Market Watch. If you are not already receiving it, you can sign up free here.
General Advice warning
The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.
