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US presidential election – vice president picks and what it means for investors

As Joe Biden picks Kamala Harris as his vice president, Charlotte Walsh looks at the upcoming US election and what it means for investors.

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.

The US election takes place on 3 November, and recently the contest has picked up a gear with the nomination of Kamala Harris as Democratic candidate for Vice President.

This article is not personal advice. If you're not sure if an investment is right for you, please speak to a financial adviser. All investments rise and fall in value, so you could get back less than you invest. Past performance is not a guide to the future.

Still too close to call?

Ms Harris, a former prosecutor and the Californian state Attorney General, is the first woman of colour to run on a Vice President nomination. Mr. Biden will be hoping that his choice will give him and his party a boost in the polls.

While Biden's currently showing a respectable lead in the polls his lead is by no means guaranteed. There's still a route to a return to the White House for Mr Trump if the Republicans hold on to certain key states which deliver considerable votes in the electoral college. The electoral college is made up of a group of officials who meet every four years – their job is to pick the president and vice-president.

Elections can normally be pretty unpredictable and uncertain, as we've learnt in recent years from both the Brexit referendum and the Trump victory. Investors should be prepared for three months of potential uncertainty and higher political risk. We can never be sure what the heat of the contest will bring or what the outcome will be.

This is particularly relevant in this US election as markets have continued to rise. Yesterday (18 August), the S&P 500 reached an all-time high. The lack of significant movement since the announcement of Harris's appointment suggests that both her appointment and a possible Democrat win could already be priced into the market although there are no guarantees

Separately, Trump is wrangling to get another economic stimulus package through Congress, which could send markets higher still. Of course this depends on what the package is made up of.

As Biden is 78 years old, there's an obvious focus on the choice of Harris as his running-mate and it sets the scene for an uncertain few months.

Big tech and the economy

Set piece events, like the upcoming TV debates, might yet swing the polls towards Trump as he tends to perform well in these as a former, "TV celebrity." Whether it'll be enough to close the gap with the Democrats remains to be seen. There are also lots of other uncertain elements to consider – Trump's continued handling of the COVID-19 pandemic, his hostility towards China and both sides' attacks on tech companies, including Amazon, Alphabet, Facebook and Twitter.

Trump has so far banned the TikTok App from September and has described Big Tech as, “very bad'' in the past. Biden has been more careful, but many on the progressive wing of the Democratic Party have already called for big tech companies to be broken up. Harris, by contrast, has been described by commentators as, "a friend not foe of Big Tech."

As with all elections, the economy will play an important role. Biden doesn't worry Wall Street anything like as much as some of the more left-leaning of the Democratic Party, despite a commitment to increase corporation tax from 21% to 28%. His focus on regenerating US manufacturing and innovation, with a commitment to modern infrastructure and a clean energy future would bolster a sector that would likely be overlooked by Trump.

Biden's focus on a, "resilient and sustainable economy", would also see him look to refuse further fracking permits for onshore oil and gas recovery. This would likely put him at odds with voters in the swing states of Pennsylvania and Ohio. Trump, by contrast, supports the oil and gas industry.

So what does this mean for investors?

This depends on how much risk you’re happy taking. With the US stock market trading at close to all-time highs and lots of tech companies highly valued, there’s a chance for more ups and downs in the run up to the election.

A portfolio with high weightings of investments to the US market might consider now a good time to take some of the gains they might've made – particularly as there's the prospect of Trump pursuing legal action should Biden win. This is following his accusation that high amounts of mail-in voting will result in a fraudulent election result – that would only lead to more uncertainty for investments.

However, there are things we can try to assume – both candidates have supporters on Wall Street, and monetary policy (interest rates and money supply) is unlikely to change under Biden or Trump. Both candidates have also spoken publicly to criticise the big technology companies and increased regulation and intervention could come from either side.

There's no doubting that there'll likely be a few months of potential ups and downs. But we think it's worth cutting through the political noise, making sure your portfolio is diversified and continuing to invest for the long term.

Learn more about diversification

Having a mix of investments with a long term view means no matter where the market goes from here, it's more likely you'll have something working well.

Charlotte Walsh is a partner at the Boscobel & Partners consultancy. Hargreaves Lansdown may not share the views of the author.

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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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