It seems as though it could all turn on a coin toss at the moment. Not more than a week ago much (most?) of the media were producing headlines that could be forgiven for knowing the US presidential election results already as they were predicting a resounding victory for Biden and the Democratic party. Much of these headlines written ‘on the back’ of numerous US poll results at the time that were indicating a change of the man in charge.
I’m not a fan of polls, and the result of the last election against what the polls were telling us beforehand explains why - they all got it horribly wrong. Investors on both sides of the Atlantic are all too aware they not only the polls but they also failed to predict the shock victory of Donald Trump in 2016. Right now the latest indicators are that Trump is closing the gap on Biden in many States - but will it be enough to keep him his seat?
The thing with polls is, in my opinion that many people give the answer that they believe is being looked for no matter how clever the pollsters might think they are being. Worse than that, particularly in a presidential race such as this one, if you’ve ever lived in the USA you’ll know just how inflammatory politics can be - so would the ‘quieter’ (there are some!) Republican supporters necessarily are keen to openly acknowledge their intentions? Many voters, of both persuasions, still see this as a choice between the devil and the deep blue sea.
So will the election result affect us in the UK, to which the answer is most certainly and on several fronts.
First and foremost trade sits at the top of the list. We are currently obliged to adhere to EU negotiated trade terms until 1st January 2021 after which we can establish our own US/UK trade terms which, hopefully, will be less complicated - with the intention of making it more straightforward and more economical to buy and sell goods to each other - than the current arrangement.
This is no small consideration as the US is the UK’s second biggest export market after the EU but when any deal is finalised will depend very much on which president is in the driving seat.
We know that Trump has already firmly nailed his intentions to the mast on this by clearly stating that he wants a speedy trade deal and with lower tariffs.
However, with Biden at the wheel a speedy resolution to any new agreement could be a long time in the making as you might recall that prior to the EU referendum in 2016 Obama that if the UK voted to leave it would be at the “back of the queue” in any trade deal with the US, and Biden was his vice president then.
On top of this consideration, regardless who is president in 2021, the US congress has still got to approve the trade agreement detail - so they have the opportunity to speed up or slow down the process depending on the majority inclinations there.
So what else is on the list? Again, once out of the EU, we will need to establish the ground rules in all areas including these key points:
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food standards,
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medicine prices (a Trump priority, with the US ‘Big Pharma’ trying to influence matters) related to which we had the UK negotiators clearly stating back in March 2020 that in any US trade talks : "The NHS will not be on the table. The price the NHS pays for drugs will not be on the table."
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and the Irish border as both Biden (with his Irish roots) and Trump have said must play an integral political part to any agreement, with no hard-border’ - yet the UK’s Brexit withdrawal agreement still remains the subject of ‘restructuring’.
But to name a just a few - there are other issues such as digital services taxation, financial services, motor vehicles, agriculture exports.
Then we have the exchange rates to take into consideration; the relative strength of the pound and dollar has a significant impact on your eventual returns.
All of these factors impinge on the markets and you can be sure that with these the initial fallout is going to be the one thing investors and the markets don’t like, and that’s volatility. So the key is, regardless of which runner your insight leads you to believe, Biden or Trump will be setting up camp in the Oval Office in 2021, you need to focus on a strong diversified portfolio of quality and durable stocks to ride out the next few months.