Private View Blog: Starting gun sounds for 2020 White House race
Is Donald Trump ever not in campaign mode? The 45th president of the United States has always appeared more comfortable addressing rallies packed with his MAGA hat-wearing supporters, chanting “build the wall or “lock her up”, than wrestling with the intricacies of legislation or trade deals.
But while these trips to the podium have perhaps provided little more than a welcome break from his day job, before too long Mr Trump is going to be in full on election mode.
The race to pick his opponent is already underway. Elizabeth Warren and Bernie Sanders have already launched their campaigns, Joe Biden appeared to do so before backtracking, and others will soon join the field.
The race for the White House is a long, drawn out process. How will markets and the economy react?
I have been talking to a number of managers running US equity funds for a feature in the next issue of PWM. In the past, when you speak to these individuals they would tell you that while the political situation is interesting, and worth keeping an eye on, it does not really have any material impact on the markets or on the portfolios they are running.
But things seem to be a little different this time.
“I think the election is going to play a big role in terms of sentiment around equity prices and the behaviour of the market,” says Matt Benkendorf, CIO of Vontobel’s Quality Growth boutique. “We are in the information age, media works differently now, and I think the market is underestimating that a bit.”
He expects there to be discussion around topics that have simply not been on the table in previous elections. The role of labour in the balance of corporate profitability, raising the minimum wage, maybe even debating if capitalism is working in its current form. “I am not saying these things are going to happen,” he says, “but it is the discussion that scares markets.”
We saw this in the previous election, when healthcare stocks tumbled on Hillary Clinton’s promise to tackle high drug prices. Some saw that as a buying opportunity, and many may look to do so again, as the topic is bound to be keenly debated once this time around.
The likes of Google, Amazon and Facebook could also be in the firing line, with how to deal with the tech giants likely to be another big issue. If a Democrat promises to break up one of these behemoths, and its stock price drops, is that a sign for investors to get out, or for them to pile in?
We can expect to see a lot of posturing from candidates early on in the electoral cycle, says Kasia Kiladis, investment director in the US equity team at Fidelity International. “But as we get further through the cycle, and the field narrows, they have to moderate their policies to get elected. There is a lot more rhetoric early on. But then less substance in the detail.”
Active managers almost seem to be relishing this election. It will be a fiery campaign – as can be expected from anything involving Mr Trump – and both the electorate, and the two political parties, appear to be at almost polar opposites. If the market does react to the debates, both face-to-face and increasingly online, then we are in for a bumpy ride. And active managers will welcome that volatility and the opportunities it is going to throw up.
Elliot Smither is chief sub editor of Professional Wealth Management. Follow him on Twitter @ElliotSmither
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