Whoever is the next US president needs to keep in mind that they will shape the future course of the global economy, according to David Absolon, investment director at Heartwood Investment Management. 
With the US election due to take place tomorrow, Absolon says both have differing policies that could shape not just the US economy, but the global one.
The battle between Hillary Clinton and Donald Trump has tightened in recent weeks, with some polls now showing the Republican candidate ahead for the first time in months.
This was partly fuelled by the FBI’s announcement that it was re-investigating the email controversy that Trump has consistently used against Clinton during the campaign process, but over the weekend the agency once again exonerated the Democrat candidate.
While the US market has remained one of the best performing over the course of 2016 despite this uncertainty, rising 21.36 per cent, since the end of October the S&P 500 has lost 5.02 per cent as the election has drawn closer.
Performance of index in 2016
Source: FE Analytics
This coincides with the rise in polls of a win for Trump and Absolon says “of the two current candidates, Donald Trump presents an unpredictable prospect and he could bring significant change”.
“In the short term financial markets will probably react negatively, but over the longer term a Trump presidency could be a boon to US assets if his fiscal stimulus plans, which are meaningful, turn out to be a positive game changer for the US economy,” he added.
However, whoever wins the race for the White House will likely offer a new era of economic policy and reform.
There has been concerns in recent weeks over the slowing nature of the economy, with latest US jobs figures coming in below expectations.
“Tackling low productivity growth, low wages and rising income inequalities are issues not just exclusive to the United States, but also apply to many other developed economies. This is not just an election for the US, but one pivotal to the future shape of the global economy,” Absolon said.
Below he outlines the three areas the incoming president will need to tackle swiftly and looks at the different ways each candidate has said they will deal with them.
Fiscal stimulus
Both Democrats and Republicans agree that a programme of infrastructure spending is needed to boost economic growth, but they disagree on how this is to be funded.
Proposals to improve roads, bridges, airports and public transportation have been put forward, plus a border wall (in Trump’s case), and while Clinton has pledged an investment of $275bn, Trump has promised to spend nearly four times that amount.
As a result of this boost to infrastructure, the MSCI USA Infrastructure has unsurprisingly been one of the best performing sectors, rising 31.74 per cent so far this year.
Performance of index in 2016
Source: FE Analytics
However, Absolon warns that “the devil is always in the detail and Congressional approval will be needed”.
Clinton aims to fund her infrastructure improvements through a one-time lower tax on profits from multi-national corporations repatriated from overseas, a measure president Obama tried only to be blocked by Congressional Republicans.
There are other funding options and Absolon added: “Both Clinton and Trump have also proposed an infrastructure bank to attract private funds and Trump has suggested lifting restrictions on energy production to generate tax revenues.”
Trade liberalisation
In a recent article, JOHCM’s Chris Lees pondered that perhaps the world has reached peak globalisation.
While Donald Trump would represent another move away from this, both candidates oppose the 12-nation Trans-Pacific Partnership Agreement.
Absolon said: “Trump has vocally called for protectionist policies, including overturning free trade agreements and introducing trade barriers to protect American industry.
“Not only would such policies accentuate the downward trend in global trade as US imports fall, but it would have negative consequences on developing economies which rely on external demand.”
Meanwhile, Clinton has been more cautious and, of the two candidates, “it would be left to a Clinton presidency to answer the anti-globalisation rhetoric, rather than fan the flames of protectionism”.
“Certainly, in terms of immigration, Clinton has made a firm stand in support of globalisation, including proposing an amnesty for undocumented workers,” he added.
“Trump, meanwhile, would tighten border controls and has blamed many of the economic ills in the US - low wagers and fewer job opportunities - on illegal immigration.”
Healthcare
In terms of domestic issues, healthcare is one of the most contentious issues that divides Democrats and Republicans.
Trump has announced he will overturn Obama’s Affordable Care Act, while Clinton has proposed enhancements to the current legislation.
This would include the establishment of a government-run public health plan to address limited insurer coverage in some states. She would, though, need the support of Congress to implement any changes.
Absolon said: “Larger insurers have departed Obama’s current programme as they have deemed it unprofitable.
“This lack of competition in a number of states is accelerating costs; the average state plan is expected to rise by 25 per cent in 2017.”
As the below graph shows, the US healthcare sector has underperformed the market over the year-to-date, returning 9.47 per cent.
Performance of index in 2016
Source: FE Analytics
Most of these gains were made following the Brexit vote, with many investors looking away from the UK market, but outside of this event the healthcare sector has remained flat and has sold off in the last week in anticipation of the election.