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US election – stock market reaction and political update

How to navigate any stock market volatility.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

With the US election well underway the short-term outlook is simple. Uncertainty.

It’s unlikely we’ll see a result today, and we might be waiting until Friday.

There’s also a growing likelihood of a legal fight lasting several weeks to decide who is formally elected President.

Market reaction

Susannah Streeter, Senior Investment and Markets Analyst

“With Donald Trump already claiming victory even though millions of votes are still uncounted, investors may have to belt up and brace themselves for some volatile sessions of trading ahead.

So far, as trading has got underway in Europe, investors seem to be adopting a wait and see approach. It is likely to be many hours and possibly days before all states tally all the ballots.

US equity futures have already been swinging. With uncertainty the name of the game there are signs some investors are ploughing into perceived safe haven bonds, with yields on US treasuries falling back.”

Political update

George Trefgarne

“Donald Trump has done better than the pollsters predicted, taking Florida and Texas.

It is likely the Republicans will retain the Senate and although make progress on the House of Representatives, still be behind the Democrats there.

However, judging by their speeches to supporters earlier, both Trump and Biden are claiming victory. Trump’s claim rests on being ahead in votes physically cast in ballot boxes on the day in the critical states like Pennsylvania, and Biden’s on being ahead once Mail-In votes are counted in coming days.

Each state has varying rules, but it is clear the Republicans will take this to the Supreme Court arguing, for instance, that votes in Pennsylvania received after polling day – but apparently posted before – should be discounted. This is what Trump means when he claims people are still voting. It is not true, but it does have a kernel of truth he has exaggerated.

Under the Constitution, a President must be sworn in on 20 January 2021. That is the hard stop date.

Under the Electoral Count Act, 14 December this year is the date by which Electoral College votes must be announced at a state level.”

George Trefgarne is CEO of Boscobel & Partners, a political consultancy.

Hargreaves Lansdown may not share the views of the author.

What it means for investors

Matthew Taylor, Research Editor

“While we can make guesses about who'll win an election, and then more guesses about how the stock market will react, that's not normally a good idea. Not being invested in the US would have hurt investors’ performance in the past, but that doesn't mean investors should overdo it and have too much invested here moving forward.

Having a balance is always a good idea, especially in uncertain times. Please remember all investments will rise and fall in value, so there’s always a chance you could get back less than you put in.

Investors should also consider their own time horizons, making sure they have a well-diversified portfolio. That means no matter who gets into the White House, or which industries flourish, you could stand to benefit in the long run.”

This is not personal advice. If you are unsure, please seek advice.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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