The result of the US election on 5 November is unlikely to prompt a stock market slide regardless of who wins, according to Claus Vorm, deputy head of multi-assets at Nordea Asset Management.
In a recent commentary note, Vorm said his team does do not anticipate that a victory by either Kamala Harris or Donald Trump will necessarily lead to an equities sell-off, but they are still taking a balanced approach to managing their portfolios.
“Unlike the 2016 election, when Trump’s win surprised markets, polling is much tighter this time, and both candidates possess governing experience, making their policy impacts more predictable,” Vorm said.
In contrast, fixed income markets could see some divergence in the impact of either candidate winning, in Vorm’s opinion.
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“Trump’s trade and tax policies could potentially be inflationary, reversing the inflation normalisation we have recently witnessed and exacerbating fiscal imbalances,” he said. “This might push yields higher for a more extended period as investors demand greater compensation for perceived credit risk in US treasuries.
“Conversely, a Harris victory would likely maintain the economic trajectory of recent years, with her centrist campaign shift and moderate vice-presidential pick suggesting limited policy shifts to the left.”
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Vorm added that whichever candidate wins the presidency a divided government seems likely, which reduces the probability of significant policy changes in either direction.
“Even if one party gains full control, recent years have demonstrated how challenging it is for either leadership to push through policies perceived as extreme.
“Should investors perceive that the new government threatens the ‘soft landing’ and immaculate disinflation trends we have seen recently, yields may rise, and equity-bond correlations could spike again,” he added.
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