We're a day late on the usual weekly publication of Integrated Insights, and that's on purpose. America voted yesterday, and while we still do not have a final outcome, the potential outcome are becoming limited by likelihood. The implications the election will have on the economy over the long term are shown to have very little impact, however market volatility's impact is about short-term fluctuation.
This week we're keeping it simple sharing two of our sub-advisor's/research partner's thoughts on the election from the perspective of the "next morning," as well as a few visuals looking at delay's in ballot counting & what "divided government" usually brings investment markets.
- A delayed result could bring uncertainty and volatility. We prefer to look past this and stay with high-conviction positions.
- We see government bond yields capped in a Biden divided government or Trump win amid modest fiscal stimulus.
- We see EM assets outperforming in a Biden win; cyclicals underperforming in a Trump re-election.
This is perhaps the most informative & measured commentary I have read on the current state of the presidential election and likely coming impacts. Perhaps of most interest is the commentary around the size of COVID-related government stimulus based on the various election outcomes.
When are Ballots Counted & What will Gridlock Bring to Markets -- Capital Group
If you're frustrated with the election count dragging on, here's a visual reminder of when non-polling votes begin to be tabulated at the state level. Note many of the swing states don't begin until Election Day. Markets typically don't like the uncertainty either.
If we happen to get a divided government outcome, the economic response has generally been favorable in the past.