LAST UPDATED: 12.01pm Hong Kong time, November 10

After a highly competitive US presidential election, Democrat candidate Joe Biden emerged as the winner after new channels declared he had won the key electoral votes of Pennsylvania state. He is set to be the 46th president of the US, on January 20, 2021. 

While President Donald Trump and the Republican Party managed to drive up their support to record levels and retain key battleground states such as Florida, Texas and Ohio, Biden and a furious Democratic turnout machine managed to retain all the states they held in the 2016 election and, in addition to Pennsylvania, flip Wisconsin, Michigan, Georgia (in a nail-biting contest), and they appear set to take Arizona as well.  

Biden would therefore gain 306 electoral college votes, the same as Trump received in the last election. And he looks set to receive over 75 million votes, by far the largest number for any US president in history.

Trump, who learned he had lost while playing golf, has taken the news with his typical lack of grace, blasting conspiracy theories and declaring he was the winner via his Twitter account during November 7. And his decreasing band of loyalists continue to claim there are illegalities with the votes. But, barring a major reversal, Biden has won.

In addition, a run-off is set to take place for two Georgia senate seats in early January, which could decide which party has control of the Senate. The outcome could dictate exactly how aggressively Biden can pursue his agenda of corporate tax hikes, a major Covid-19 stimulus bill and massive green infrastructure investment plans. 

AsianInvestor is publishing the latest thoughts of analysts, economists and fund managers from leading financial and investment firms about the economic and financial implications of Biden's victory.

The below entries have been edited for clarity and brevity. The most recent update appears at the top (times indicate when received, in Hong Kong time).  


Matt O’Sullivan, head of Asia Pacific origination
M&G Investments

10.58am, November 10

In his acceptance speech President Elect Biden underlined the need for a period of healing. The major focus of this is clearly trying to repair the deep divide that has grown in the US, and reaching across the aisle to Republicans to co-operate, something Biden has done throughout his career.

However, could this also lead to a slight softening of the current tense relationship between China and the US? If this were to occur, this could re-invigorate the investment efforts for US entities to invest in China and the region generally – potentially leading to increased opportunities in private credit, both through supporting US sponsors in the region and working with US investors, including banks, in co-investment.

Additionally, Biden has stated that the US will re-join the Paris agreement once he takes office. If this occurs, it could further increase the focus of US investors on ESG investments. This could then lead to increased activity in the Asia private credit market through investments which support financial inclusion, help with renewable energy infrastructure projects or otherwise allow investors to utilise their capital responsibly to help, particularly in the midst of the global pandemic and required recovery.


Seema Shah, chief strategist
Principal Global Investors


10.56am, November 10 

The clearing of the election fog has permitted underlying market fundamentals to come back into focus, resulting in a strong push upwards. Easy financial conditions, driven by historically accommodative monetary policy and reinforced by dovish comments and actions from central banks in the last 10 days are a significant positive, while the most recent vaccine news suggests a “return to normality” should be coming sooner rather than later.

Don’t forget too, that the election outcome is arguably the most favourable scenario for investors. A split congress or even a blue sweep with a very marginal majority implies that neither large tax hikes nor major changes in regulation are likely. All the chips are starting to line up, and market sentiment may be in the early stages of a burst of positive energy.


Investment team members 
T. Rowe Price

11.10am November 8

Joe Biden is likely to seek additional funding for states and municipalities. The economy is weakest at the state and local level, where governments need help to mitigate cuts in essential services amid quickly declining revenues. This push for funds for localities could help stabilise and support the credit quality of municipal debt for years to come as the economy recovers from the pandemic. 

Biden has proposed raising the corporate income tax rate from 21% to 28%. That would still leave the rate meaningfully lower than the earlier rate of 35%. Republican opposition could limit or prevent some of these measures to increase taxes, but the proposed tax rate increases could collectively reduce after‑tax profits for companies in the S&P 500 Index. However, some industries could benefit from increased spending and the effects would be manageable and likely offset, in part, by fiscal stimulus.

All signs suggest that Biden will take a tough stance toward China on market practices and human rights issues, and maintain pressure on China to address concerns about intellectual property rights in the technology sector. Were volatility to lessen, that could be a positive for technology companies that are perceived as having some exposure to trade tensions between the two countries.

Biden has indicated he will seek higher levels of federal procurement spending and tax incentives to create jobs and drive economic development by rebuilding critical infrastructure. This push would focus on reducing carbon emissions and investing in clean‑energy technologies, although it could face opposition from Republicans in Congress. If implemented, Biden’s ambitious plans could accelerate advances in energy efficiency and emissions reductions.


BlackRock Investment Institute
BlackRock

7.15am November 8

The signifies a return to a near-term market environment dominated by low rates, a hunt for yield and growth stocks. Risks to the outcome appear remote, and we prefer to look through any market volatility that legal challenges by President Trump may bring. 

A divided government would constrain the Biden administration’s ability to implement plans for large-scale fiscal stimulus and public investment, tax, healthcare and climate related legislation. We see an increased focus on sustainability under a divided government, but through regulatory actions, rather than via tax policy or spending on green infrastructure. It also would likely signify a return to more predictable trade and foreign policy – even as US-China rivalry is set to stay elevated due to bipartisan support for a more competitive stance.

We see the scope and size of fiscal stimulus and public investment as much more modest than what a united Democratic government might have delivered. We’re monitoring the fiscal response closely, as a premature retrenchment could set back an economic restart that has so far surprised to the upside.

Long-term US Treasury yields ran up ahead of election day in anticipation of a Democratic sweep, but the prospect of a divided government removed the accelerant and brought yields down again. A slower upward move in yields bodes well for risk assets, in our view, especially for credit and growth companies that have dominated markets for much of the post-crisis period.

We expect tech and healthcare companies, the quality factor and large caps to perform well under a Biden divided government. Emerging market assets should perform on improved trade sentiment, especially in Asia ex-Japan. Many Asian countries have contained the virus and are ahead in the economic restart. We are reviewing our tactical asset views in light of the election result. Key inputs include the evolution of the virus shock and the timeline for a vaccine – and their potential to bring forward market expectations of inflation and change equity market leadership to cyclicals.


Dechert

2.54am, November 8

Now that it appears Joe Biden has won the presidency, it’s time to take a serious look at the Democratic party platform and how a Biden administration will likely impact business.

Trade and regulation: When it comes to the tariffs and trade war with China, no one expects Biden to be “soft” on China, or for a U-turn in any China policies. Instead, what we may see is an effort to rein in China’s commercial and military advancements in a more multilateral way, looking for allied support. The China tariffs will be revisited, but it is too soon to predict the outcome. 

In any case, we expect economic sanctions to remain a primary tool of US foreign policy under a Biden administration. We expect Biden to take a tougher stance against Russia, while continuing to use sanctions against China and Hong Kong to combat alleged human rights abuses and undermining of Hong Kong democracy/autonomy.

In respect of export controls, Biden is expected to take a hard stance against China. He may reinvigorate some of the multilateral regimes that coordinated global controls against products and technology that can be used by terrorists. The Biden administration will almost certainly revisit ongoing initiatives such as artificial intelligence, semiconductor technology and 5G telecommunications.

We anticipate that China will remain a target of enforcement and regulatory efforts under the new administration. A Biden presidency may well prove to be no less aggressive in prosecuting and restricting Chinese interests than the Trump administration. As the current China Initiative has involved hundreds, if not thousands, of career government officials, we expect this work to continue regardless of who occupies the White House.

Morever, robust US government reviews of foreign direct investment for threats to national security will continue. While the Committee on Foreign Investment in the US (Cfius) may continue to act aggressively with respect to Chinese investments, we expect its reviews to be less public than under the Trump administration. 

Stimulus: Biden’s spending priorities are focused on infrastructure, the green economy and ensuring US manufacturing and advanced technology capability, with these priorities often overlapping in various proposals.

Businesses involved in designing, building and supplying materials for construction projects – from roads, utilities and bridges to factories and schools – are likely to see a boost. The same is true for businesses involved in clean energy technology, like batteries, electric cars and trains, and carbon sequestration. However, without Democratic control of Congress, stimulus efforts are likely to be more modest.


Gregory Daco, chief US economist
Oxford Economics

1.52am November 8

Biden will find enacting his major tax and spending proposals difficult. Increased policy certainty, trade multilateralism and a pro-immigration stance should generally benefit the economy, but they are unlikely the drastically modify its growth trajectory.

With the US health situation rapidly deteriorating and economic momentum slowing, we forecast GDP growth averaging 3.6% in 2021, compared with 3.7% last month. Real-time data is quite sobering with demand being restrained by surging Covid-19 infections, rising over 100,000 per day, and slower employment gains proving insufficient to offset lapsing fiscal aid.

Our November baseline assumes a short-term fiscal relief bill around $1 trillion will be passed around year-end, but this will be subject to heightened policy uncertainty during the lame-duck session of Congress. Further, we stress that a non-peaceful transfer of power is a risk to monitor closely.

In early 2021, we expect Biden will attempt to put his stamp on policy through executive actions and lobbying efforts with moderate Republicans to pass some elements of his agenda. But, the first step to achieving a sustainable recovery will come through a strong health solution to the Covid-19 crisis.


Nigel Green, chief executive and founder
deVere Group

1.30am, November 8

A Biden win was pretty much priced-in by the markets, his victory will eliminate uncertainty – which they loathe – and they will rally further as a result.

Even possible legal challenges from Trump will be dismissed by investors who will instead be focusing on the renewed certainty and stability that a Biden White House will bring, including in key areas such as trade tensions with China, keeping the US in the World Health Organization, resigning the Paris climate agreement, and abiding by other international agreements and long-standing international allies.

Biden will need to work with the Republican-led Senate to secure fiscal stimulus to bolster the economy.  He might struggle to get the $3 trillion wanted by Democrats, but some package is likely. This will buoy the markets and would have investors think about a broader-based economic recovery – rather than a narrower, tech-heavy one. As the world’s largest economy, sustainable, long-term growth in the US will have a positive ripple effect for the world economy.

The reduced chance of massive fiscal stimulus will also mount pressure on the Federal Reserve to inject further liquidity. In addition, the Biden win without full Senate support means less risk of regulation and higher corporate and personal taxes, which will give more oxygen to the markets and economy. In general terms, sectors to benefit from the Biden administration’s agenda include renewable energy, industrials and infrastructure, and small caps.

The world is looking at America, it needs to lead the world economy in a positive, forward-thinking and smartly way –  and at pace. If it doesn’t, we can expect American economic dominance to ultimately be replaced by an emerging and fast-growing Asia.


THE BELOW SUBMISSIONS WERE RECEIVED BEFORE JOE BIDEN WAS DECLARED THE ELECTION WINNER 


Zhikai Chen, head Asia equities
BNP Paribas Asset Management
Paul Sandhu, head multi asset quant solutions, Asia Pacific
BNP Paribas Asset Management

2.47pm, November 6
 
Zhikai Chen: While we focus on companies’ fundamentals in our funds rather than top down views, In the event of a Biden victory – it will potentially bring relief to Asian equity investors as US policies will likely return to the prior norm versus the current Administration’s unpredictable tactics.  This reduces the political and policy uncertainties between the two largest economies and allow investors to focus more on company fundamentals. 

We are mostly invested in companies where we have very good visibility on the earnings outlook and derived the vast majority of their revenues from domestic demand.  The reduction in policy uncertainties are helpful for these investments to re-rate to their intrinsic value in our opinion. 

Paul Sandhu: US markets have zig-zagged to a moderate positive advance to end yesterday (November 5). The main reason is that the assumption is that a stimulus deal will be reached, but may not be as expansive as would have been with a completely democrat controlled government. 

The impact in Asia will be a more medium to long term effect.  This will be a result of the updated foreign policies that the administration invokes. Specifically, with China, the last four years could be seen as setting up a negotiation position for the next four years.  And this could be positive more for Asia overall on a medium to long term basis.

A potential Biden presidency would mean a bigger stimulus package to support the economy, more infrastructure spending and climate change goals to align with many other countries. The costs are supposed to be supplemented by tax hikes along with job growth coming from expanded energy-transition sector. The market has seen this trade-off as positive, and this was priced in to some degree.

However, because it is likely that senate remains with republicans, many of these policy changes could be slightly to significantly muted. Risks will depend on what the electoral college victory spread is. As always, its prudent to have some tail hedges online for the next few weeks, if those are on, there will be opportunities to buy into volatility.


Eoin Murray, head of investment, international business
Federated Hermes
Steve Auth, CIO for equities
Federated Hermes

9.18am, November 6

Eoin Murray: It seems likely that we end up with a Democrat in the White House, a Republican Senate and a Democrat House, which will lead to gridlock. That being said, in terms of overall policy, this likely means that the US will get a much smaller fiscal stimulus, so monetary policy will need to continue to do the heavy lifting and the Fed will need to reiterate its ‘lower for longer’ rate policy. 

Unfortunately, Biden will likely struggle to confirm his cabinet nominees, particularly in sensitive areas like finance, employment and environmental regulation – meaning it is highly probable that plans for substantial legislation on things like voting rights, healthcare and climate change will be stopped dead in their tracks.  In the very near term, I suspect that both sides will be lawyering up, but this should only be a near-term distraction and ultimately come to nothing. 

Yesterday (November 5) we saw the US exit the Paris Climate Agreement, formally casting off the signature international commitment to cut carbon emissions and limit global warming. Biden however has stated his intentions of re-joining if elected, a move that would align with his climate agenda, the most ambitious of any presidential candidate in history.involve a shift in priorities towards providing Covid-19 fiscal relief and raising infrastructure spending and away from the sorts of redistributive policies and regulatory intrusions that threated to shake some of the stock market behemoths.

Steve Auth: The key risks for the market in the next few weeks come down to two, in our view. First, we could see a rise in civil unrest as the recount continues. Depending on how bad this gets, it could negatively impact economic forecasts for the economic revival. Second, the Covid resurgence we are seeing in Europe could start to pick up steam here as well. We see both these risks as real but short term. 

Looking forward to the spring, Covid should be waning with the combination of improving treatments, the arrival of multiple vaccines, warmer weather, and fewer and fewer people left to infect. The economic revival already underway should be gaining steam with another fiscal stimulus deal likely and visibility on the election/forward tax environment encouraging an investment resurgence.

Cyclical companies in particular will be lapping very weak or negative numbers, helping the cyclical side of the market which has been a key drag till now. The Fed will keep short rates pinned near zero, and with deficits likely to rise in a divided government scenario, the yield curve should steepen somewhat; more good news for financials, a big piece of the value trade, where stocks are cheap.

So while we had no clear political winner, we did have a winner: Mr. Market. 


Luca Paolini, chief strategist 
Pictet Asset Management

9.09am, November 6

We believe a Biden win with a split Congress is perhaps the best outcome for riskier asset classes in the medium term. Trump’s corporate tax cuts will stay in place while fiscal stimulus should turn out to be sufficient, not excessive. What is more, policymaking should become less erratic with Biden in the White House, which could reduce stocks' risk premium over time.

The markets have already reacted positively to the election outcome – with strong gains in equities and a decline in bond yields – the latter providing a major boost for growth stocks. A Biden administration with a more conventional approach to international relations should also provide a boost to emerging market assets, in which we retain an overweight position.

That said, riskier assets continue to trade in a range that has largely held since September and there is nothing to suggest that the threat posed by Covid-19 has dissipated. So even if it appears that stocks are in a bull market and are likely to build on their gains next year, particularly in cyclical sectors, risks remain in the short term. Which means we cannot justify taking a more bullish stance.


Paul O’Connor, head of multi-asset
Janus Henderson Investors

7.02am, November 6

In a broad sense, the market reaction to the unfolding election news suggests that financial markets would prefer to see a constrained Biden presidency, than one given a mandate to deliver the strongest version of his preferred policies. This is not an unusual response; in fact, history tells us that split governments have typically delivered better equity market performance than unified ones and Democrat-led ones have been best of all.

In this case, we would expect the Senate’s dilution of a Biden administration’s programme to involve a shift in priorities towards providing Covid-19 fiscal relief and raising infrastructure spending and away from the sorts of redistributive policies and regulatory intrusions that threated to shake some of the stock market behemoths.

Equity markets usually bounce after big anticipated risk events, like US elections. With a number of indicators suggesting that most investors had assumed fairly defensive positioning in the run-up, a fairly typical relief rally seems also to be underway here. Investors are putting precautionary cash balances back to work and unwinding pre-election hedges.

The prospect of a Biden-led administration pivoting the US government back towards more orthodox and multilateral approaches to international relations and also improving trade relations with Europe and Japan, offers some specific support to this general theme.


Eric Vanraes, portfolio manager for the Strategic Bond Opportunities Fund
Eric Sturdza Investments

9.57pm, November 5

The picture is still unclear, BUT we are now sure that there will be no blue wave at the Senate, and that changes (almost) everything! It means that the “leftist” part of Biden’s programme will not be implemented. This is why both equities and bonds rally.

Yesterday, we took profit on our whole position in 30-year US treasuries and we also reduced our exposure to 10-year treasuries. As a result, our duration decreased substantially (from 5.4 to 4.7).

A higher duration was a strategy to hedge the credit risk – that is, a potential spread widening of our high-beta corporates. This strategy is less appropriate in the current environment.

Should treasury yields increase again, we would buy back some 10-year treasuries and 30-year treasuries because whatever the outcome of the elections, Covid is still present and we can’t exclude a second wave in the US after Europe.

The Bank of England took action with a more ultra-accommodative policy than expected. It means that the European Central Bank and the US Federal Reserve would do the same if needed.


Frédérique Carrier, head of investment strategy
RBC Wealth Management

6.27pm, November 5

The equity market is taking potential uncertainty and gridlock in its stride – at least so far. The S&P 500 and Dow Jones Industrial Average futures fluctuated moderately overnight and both indexes are up in early trading on Wednesday; volatility has been muted.

The election uncertainties were initially not a shock to the market’s system because institutional investors had mulled over various post-election scenarios well ahead of election day.

But market volatility may pick up if the results are not sorted out soon. In this case, the path forward could involve twists and turns regarding vote recounts, court battles about the recounts and/or the legality of certain ballots, and then the multi-step constitutional process for finalising results in the electoral college.

Still, while a contested election could bring forth volatility, we do not believe it would be a game-changer for the market – no matter who ends up in the Oval Office.

The train is already moving forward. The economy and corporate profits have substantially improved since the Covid-induced recessionary lows last spring, and we think they have scope to grow further in the next 12 months, despite the fact that infection rates are rising again.

We would stick with long-term investment plans, even in the face of election-related volatility. The US economy should reach its pre-pandemic level by 2022 and return to its prior growth trajectory in 2023 – a much shorter time frame than it took following the global financial crisis.


Louise Dudley, global equities portfolio manager
Federated Hermes

5.30pm, November 5

Over the last few months we have seen such extreme volatility in the market that today feels no different. What has come to pass is that the uncertainty may continue at least in the near term as an extended voting/counting period may stretch. The voting data is yet to be examined and no doubt there will be significant lessons learned on both sides once the underlying demographics of voters are analysed. Little uncertainty has been removed at present, other than perhaps the end is now in sight, though even the time horizon now seems to be indefinite.

We know that Covid-19 was one of the most cited voting issues. However, the economy is also a significant contributor to where people’s votes fall. We know the economic status of the US is above where we were in 2016, but could this have come more steadily? Where will the ongoing growth come from given there is little room for tax to move lower, particularly in light of the Covid deficit contribution.

Once settled, the expectations of further fiscal stimulus agreement will drive a risk on trade, particularly in light of the weakness seen last week. Quite how much support is still to be determined but we expect the sectors benefitting the most are likely to be those that have already been the beneficiaries of such measures.

We continue to focus on quality characteristics alongside valuation, growth and momentum. This includes a focus on good or improving ESG characteristics which seek to identify solid companies which are well positioned for the future. The ability to time markets and styles is something that offers some upside in stable trending markets. While we continue to see the ongoing volatility in equity markets, remaining balanced in our exposure to themes and styles remains our favoured approach to delivering the consistency of outperformance.  


Andrew Zurawski, associate director for Asia investments
Willis Towers Watson

5.07pm, November 5

A combination of a Biden presidency and a Republican controlled senate will have mixed outcomes for economic growth and the outlook for riskier assets. Larger scale fiscal stimulus over the first half of 2021 becomes less likely, which will keep US interest rates lower but weigh on near-term growth.

The Biden policy to roll back the Trump administration’s 2017 corporate tax cuts is unlikely to pass the Senate, which should continue to support equities. Longer term, a Biden presidency is likely to be characterised by a less combative foreign policy, particular towards Chinese trade relations, which has been a source of instability in recent years.


Fabiana Fedeli, global head of fundamental equities 
Robeco

3.15pm, November 5

From the point of view of equity markets a divided Congress at this point is the least desirable scenario, independently from which side wins, as this could mean delays in policy execution and in what we believe is a much needed stimulus package in the near term.

There are two equity trades here: in the short term, until uncertainty on the outcome continues, we can expect investors to turn more defensive and some of those “Blue sweep” trades that we have seen arising since the summer and even more so over the last few days are likely to unravel: emerging market equities and FX, including China; the renewables theme (on expectation that a Biden administration would favor more environmentally friendly policies); and cyclicals over big tech.

We are also likely to see some relief in “Red tide” trade, such as oil, or Russia which is a country that is expected to incur sanctions under a Biden administration. This however, could be a very short term trade and just in place until we have some clarity on the win.  

In the end, which side wins will not determine equity market direction but rather sectors and – at an international level - country selection. One key point to watch is  the timing of a US stimulus package, as a delay would be negative for the US economy, consumption and cyclicals.

Given the polarisation in equities markets between cyclicals and growth stocks, and given the high expectations already embedded in the tech-savvy stocks that have driven the upside in equity markets, the next stage of market upside will have to come from the more cyclical stocks. These, however, need better visibility on an economic pickup.  Keep your eyes peeled on policies and Covid. That’s what really counts.


Eli Lee, head of investment strategy
Bank of Singapore 

1.40pm, November 5

Having just won Wisconsin and Michigan, presidential candidate Joe Biden has obtained 264 electoral votes. He currently remains in the lead for Nevada, which yields 6 electoral votes. Should his lead hold up, then we would expect him to reach the 270 electoral votes necessary to win the presidency.

We believe that Biden’s first order of business will be to manage the Covid-19 pandemic, and, in the first few months of his presidency, focus on pushing through a new Covid-19 relief package to provide much needed unemployment and business support. Despite a Republican Senate in place, we believe that there is sufficient common ground between both parties to enact a relief aid package that is around $500 billion in 1Q 2021, which will be critical in supporting the nascent post-pandemic recovery. 

Later in his term, Biden is likely to focus his attention on infrastructure spending, which has some bipartisan support, but again the Republican Senate is likely to only greenlight a far smaller package (by our estimates around $500 billion). 

This is second best scenario for investors; market outlook remains positive Overall, despite the scenario of a Biden win with a divided Congress only second best for markets, we still see many positives. First, the reduced uncertainty from putting the election behind us will help investor sentiment, and also give the Fed the necessary clarity for crafting policy ahead. The expectation that Biden’s team will be more strongly positioned to manage the Covid-19 pandemic than Trump's administration will also boost investor sentiment. 

Under a Biden Presidency, we expect an overall environment characterized by the postpandemic economic recovery, moderately higher inflation, and a weaker US dollar. This will be broadly supportive of equities, credit, commodities, and emerging markets.


David Chao, global market strategist for Asia Pacific (ex-Japan)
Invesco

12.55pm, November 5 

US China relations: 

  • Asia will benefit from recast US-China relations.
  • Although I don’t see a U-turn in US-China relations, I think that a Biden presidency will certainly be more measured in its approach to China.
  • The shrill rhetoric that has dominated the Trump White House and rattled APAC markets will certainly dissipate.

Investment implications for Asia Pacific investors:

  • I think we will see a rotation out of safe havens such as treasuries and the USD into more risk assets such as equities as the political overhang is removed.
  • Also with the lack of a Democrat Sweep of Congress and its corresponding significant fiscal stimulus bazookas, I think that investors will rotate from cyclicals/value back to growth/technology stocks. Already we are seeing the VIX (volatility index) start to come off which should benefit emerging markets, particularly emerging market Asia assets.
  • I expect the US dollar to weaken from current levels until the end of the year and to 2021 – which has been a secular theme that was only paused for the election.

BlackRock Investment Institute

4.44pm, November 4

A win by former vice president Joe Biden could bring a heightened focus on sustainability through regulatory actions and would likely signify a return to more predictable foreign policy. A re-elected Donald Trump would likely double down on the “America First” approach to immigration and trade, and usher in more deregulation. 

We see fiscal policy as a critical area, as it is needed to prevent permanent economic damage from the virus shock. A Biden win with a divided Congress would constrain Democrats’ ability to implement key policy priorities and launch large-scale fiscal stimulus. Stimulus in a second Trump term could be bit larger, in our view, with negotiations on a fiscal package to cushion the virus shock restarting. We expect little public investment in either case.

We see the election outcome’s implications playing out in fixed income and leadership in equity markets. We expect long-term yields to be capped under a Biden divided government or Trump re-election – and could see US Treasury yields falling further after a pre-election run-up in yields on expectations of a Democratic sweep.

Longer term, we see government bonds challenged amid a higher inflation regime. We expect tech companies, the quality factor and large caps to perform strongly under a divided government – as they have done in the past.

We believe emerging market (EM) assets would likely outperform on improved trade sentiment in case of a Biden win, especially Asia ex-Japan assets. Many countries in that region have managed to contain the virus and are further ahead in the economic restart.

We see challenges for emerging market assets and global cyclicals in a second Trump term due to a possible resurgence in trade tensions.


Stephen Dover, head of equities
Franklin Equity Group
Scott Glaser, co-chief investment officer
Clearbridge Investments

3.46pm, November 4

“Probably the markets were one of the better predictors of what was going to happen [with the US election], certainly even better than the polls…There does seem to be some certainty that there’s not going to be a big change in policy one way or the other, regardless of who’s the president I think that’s probably why the market’s somewhat positive.” – Stephen Dover

“While history is great and history is a guide, what we’re going through in terms of the markets and the divisions in the country, something that’s a little bit different from what we’ve seen in the past.”  – Scott Glasser

“Probably the [US] election is not going to be the biggest factor on what happens in the markets over the next coming few months. It’s going to much more likely be the path of the COVID.” – Stephen Dover

“I think it’s pretty clear that we’re going to have some level of stimulus that that then is approved. And so that’s positive for equities in general. I think that there is continued hope and scientific evidence that we’re proceeding with a [Covid-19] vaccine. – Scott Glasser

“If there’s anything that I would hope investors would learn from this last week or two, is that it’s very hard to make…decisions based on elections. And certainly we can’t trust the polls. We really try to stick to the fundamentals.” – Stephen Dover


Eoin Murray, head of investment, international business
Federated Hermes

9.18am, November 6

It seems likely that we end up with a Democrat in the White House, a Republican Senate and a Democrat House, which will lead to gridlock. This mix of leadership will be an adjustment following the red wave of the Trump administration and the blue wave of Obama, where all three were aligned. That being said, in terms of overall policy, this likely means that the US will get a much smaller fiscal stimulus, so monetary policy will need to continue to do the heavy lifting and the Fed will need to reiterate its ‘lower for longer’ rate policy. 

Unfortunately, Biden will likely struggle to confirm his cabinet nominees, particularly in sensitive areas like finance, employment and environmental regulation – meaning it is highly probable that plans for substantial legislation on things like voting rights, healthcare and climate change will be stopped dead in their tracks.  In the very near term, I suspect that both sides will be lawyer-ing up, but this should only be a near-term distraction and ultimately come to nothing. 

Yesterday we saw the US exit the Paris Climate Agreement, formally casting off the signature international commitment to cut carbon emissions and limit global warming. Biden however has stated his intentions of re-joining if elected, a move that would align with his climate agenda, the most ambitious of any presidential candidate in history.involve a shift in priorities towards providing Covid-19 fiscal relief and raising infrastructure spending and away from the sorts of redistributive policies and regulatory intrusions that threated to shake some of the stock market behemoths.