With so much uncertainty and volatility in the lead up to the US presidential election, what are the market sectors set to benefit, and how can investors mitigate the risks?
James Whelan from VFS Group Portfolio Manager and Investment Manager at Banyantree Investment Group, Zach Riaz, provided their perspective.
“I think it’s still too close to call and I think the market is slowly coming [to that conclusion],” Zach says. James agrees with Zach that Trump could still come from behind.
“I think that anyone who is going into next week without any downside protection is a fool, and the market has definitely taken that into consideration.”
Zach believes that market support for a ‘blue wave’ landslide for Biden has definitely retreated.
“The reflation trade was definitely on and I think that’s now been deflated a little bit,” he says. “It was all around the fiscal stimulus package.”
James believes copper is a safe bet regardless of the election outcome.
“Copper is at 18 month highs. You can be in copper and it really doesn’t matter what happens. If there’s a contested election, the US dollar will continue to probably depreciate, which is going to help the copper price so you could probably just buy copper. Go nuts.”
Zach thinks the oil is the commodity to go for at the moment.
“When blood is on the streets, oil is something I think investors should be looing at. Long-term oil is another conversation to be had but right now, locally, oil looks like an interesting space.”
Whoever wins… China set to be biggest economy
Portfolio Manager at Ellerston Capital, Mary Manning, says the US is in decline and China will become the world’s largest economy in the coming years, with trade disputes between the two powers to continue. She says that if Biden wins next month’s election, he will not necessarily adopt a more accommodative approach to relations with China.
“He’s not going to be soft on China but he probably will revert to foreign policies and economic policies that we’re more familiar with and it will likely be more multilateral than just the US and China going head to head.”
Mary says the Chinese economy has survived the pandemic comparatively well and is likely to resume its ascendency.
“The latest GDP print was 4.9 per cent growth, which is amazing, and then if you look forward to 2021, China is expected to be growing around 8 per cent, so this is multiples higher than what you’re getting in other countries in the world.”
Mary expects a Biden win and pandemic recovery to be good for Chinese equity markets, particularly the tech sector.
“Alibaba and JD are considered consumer stocks but they’re very much technology stocks. Alibaba in particular with Alibaba Cloud and Alipay – some of the fintech aspects of things.”