The upcoming US election has been billed as one of the most controversial ever, with allegations, lawsuits and mud-slinging dominating headlines over recent months.
With outspoken candidates Donald Trump and Hillary Clinton at loggerheads in the bid to become president of the world’s largest economy, investors would be forgiven for exercising some caution.
In an article published last month, FE Trustnet asked industry commentators whether investors should reposition their portfolios ahead of the election, with some 40 per cent of readers having significantly altered their portfolios.
While some warned this isn’t the best course of action, many have said it will indeed impact some areas of the market more than others, depending on which candidate is successful.
In the below article, managers and strategists from several fund management firms discuss what either outcome could mean for different asset classes.
Gary Greenberg: “Markets outside the US would not celebrate a Trump victory” 
FE Alpha Manager Greenberg (pictured), who runs the five crown-rated Hermes Global Emerging Markets fund, says there could be a trade war between the US and China if Trump wins the election, which would have a detrimental impact on both economies.
While he believes China’s central bank could withstand pressure from the US, he warns the rest of Asia could be hit by lower trade surpluses.
“A US-China trade war would likely have global consequences, driving Asian exporters into steep downturns and potentially causing a worldwide recession. Of course, the risk of the new Cold War turning hot under Clinton is not negligible and periodic sparks or face-offs would keep investors nervous,” he said.
“Markets outside the US would not celebrate a Trump victory. Global bond prices would likely tumble due to his willingness to countenance a budget deficit of 10 per cent of GDP, and stocks would follow suit as investors discount the threats of new tariffs, an exit from the WTO and a trade war with China.”
Dani Saurymper: “Enthusiasm for pharma and biotech has been understandably dampened”
AXA Framlington Health manager Saurymper says uncertainty surrounding the US election has understandably dampened market enthusiasm for pharma and biotech.
Performance of index in 2016
Source: FE Analytics
However, he says there are areas of common ground between both presidential hopefuls when it comes to healthcare.
For instance, both Trump and Clinton have criticised drug makers for increasing prices and they both support increasing National Institutes of Health funding.
“Trump and Clinton have both indicated support for Medicare to negotiate prices under Part D [a programme to subsidise prescription drug costs] which means while the perils of a Democratic clean sweep are likely to be avoided, the pharma and biotech sectors will remain under sustained pressure even under a split Congress scenario,” he explained.
“Clinton and the Democrats want to ‘fix’ Obamacare, expand Medicaid and drive down costs which under the scenario described above should be a positive for the following healthcare sub sectors: managed care; hospitals; medical devices and digital health.”
Colin McQueen: “A Trump win would no doubt cause a sharp sell-off in markets”
Colin McQueen, who manages the Sanlam FOUR Stable Global Equity fund, says political conditions are becoming increasingly polarised and warns that extreme parties are becoming more popular globally.
As such, he believes there is a chance Trump could gain victory despite the fact polls are leaning towards a Democratic win.
“A Trump win would no doubt cause a sharp sell-off in markets – bear in mind more than half of daily trade stems from computers and ETFs – but the actual economic impact would evolve more slowly,” he explained.
The manager says the healthcare sector has been a focal point for investors, given divergence in policy between both candidates. However, he says this has overshadowed positive, long-term fundamentals of many stocks in the market area.
“Over the medium term we see a number of key tailwinds, such as companies able to sustain above-average growth due to the strengths of technology and scale advantages. We also see a rise in demand due to demographics and rising living standards in emerging economies – as well as potential for scientific advances, most notably in biotechnology,” McQueen added.
Performance of index over 5yrs
Source: FE Analytics
James Bateman: “A Clinton presidency would not be without risks”
Fidelity Multi Asset’s CIO James Bateman says UK investors should pay close attention to the impending election, given that 75 per cent of the FTSE 100’s earnings are denominated in dollars.
He says the FTSE 250 should be well-shielded, although investors still need to bear in mind that the US is the UK’s largest exporter.
“While both candidates are likely to see their policies watered down by Congress, a Clinton presidency would likely represent the greater risk for individual sectors, with a president Trump threatening wider risk-off moves in the immediate aftermath of the result,” he said.
He adds that, over the medium-to-long term, the dollar is likely to strengthen under a Clinton victory given her emphasis on supportive fiscal policy.
“A Clinton presidency would likely be beneficial for UK large-caps,” Bateman continued.
“More widely, a Democrat victory would also represent a broad continuation of the US’s global role. This would also be supportive for internationally exposed UK companies, particularly those with emerging market exposure, which rely on the relative openness on the international system.
“However, a Clinton presidency would not be without risks, particularly for the healthcare sector, which accounts for just over 11 per cent of the FTSE 100.”
Andrew Goldberg: If Clinton wins there’ll be little change macroeconomic policy
Goldberg, who is global market strategist at JP Morgan Asset Management, says a Clinton win is unlikely to lead to much change in terms of macroeconomic policy. He says it is unlikely the House of Representatives would support large tax increases on the rich, significantly more restrictive financial regulations or expansionary fiscal policy.
“We do see the potential for one significant policy change: if Republicans felt that Trump’s anti-immigration rhetoric helped them lose the White House, they might want to enact some version of immigration reform,” he said.
“We might also see some corporate tax reform if Clinton and Speaker Ryan can find common ground encompassing lower rates but fewer loopholes.”
In the case of a Trump victory, Goldberg warns this will cause greater uncertainty, not just because his final policy proposals are unknown, but because he could face difficulties moving these proposals through Congress.
He said: “As president, Trump would have executive authority to arrest and deport undocumented immigrants. However, he might well hesitate to do so immediately because of the economic disruption that would inevitably cause.
“He could also ask the Treasury department to label China a ‘currency manipulator’ and use that ruling to impose countervailing duties on specific industries. However, it is possible that he would threaten to do so as an opening bid in an attempt to negotiate certain trade issues with China.”