US Elections 2020: What it means if you are an investor in the American Stock Markets

The United States of America, being the largest economy, any movement in the country affects the entire world. The impact on some countries is higher than the others but the entire world would be watching the US Elections with eager eyes to understand how it impacts their stance in the world economy. Countries in North Asia who have greater overseas revenue exposure will be benefited if Biden is elected as he brings along more multilateral trade and foreign policies. Countries like Indonesia, Singapore and India are likely to benefit without much negative impact with the win of either candidates. Biden has mentioned that on being elected, he will lift the temporary suspension of H-1 B visas, thereby giving a boost to the Indian IT industry. On the other hand, on election of the Trump Government, China’s equity outperformance would come to halt but the trade relations between China and USA are likely to deteriorate.

However, investors who have invested in the US Markets or are looking for opportunities to invest in the market should not be flustered about the outcomes of either parties or candidates winning the election. If we analyse historical data, we will see that the only time the equity markets have dipped between 3-6 months after the election was in 2008 fuelled by the financial crisis. Also in 2001, the markets had fallen due to the terrorist attack exactly a year after elections.  For all the other presidential elections, the trend has been a cheering up of the market with an average gain of 15%. This suggests that the equity market will fly higher in either case of Trump or Biden taking the helm. Additionally both the candidates have committed bigger economic stimulus and either win will boost the US stock market. Having said this, one cannot deny that the markets will be volatile and the impact might be dramatic if either of the candidates urges on contesting the outcomes. But this will be short-term until stability is restored.

Some sectors in the US that are likely to see either revival or accelerated growth after the election would be airline, technology, electric vehicles, construction, engineering and renewables. The Indian investors who are keen to invest in the US Stock Markets should not be impatient and re-plan their investment allocation based on the election results. The election might give long term investors a chance to revisit their portfolio and make small gains rather than revamping them. 

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Investors should keep a close watch on renewable and EV companies if Biden comes to power and Oil & Gas and refineries like Abraxas Petroleum Corporation, Berry Petroleum Corporation etc. should be focussed on if Trump continues to rule.

(By Vinay Bharathwaj, Co-CEO and Co-Founder, Stockal.)