With just under 50 days to go until the US presidential election, investors remain no clearer over the result and what it will mean for their portfolios. 
While Democrat Joe Biden is currently leading polls against incumbent Donald Trump, nobody is writing off the current occupant of the White House who also lagged his opponent in the run-up to 2016 election.
As such, it remains very early for investors to begin positioning for either outcome in what is likely to be a closely fought election battle.
Below, Trustnet spoke with four managers to find out what changes they are making to their portfolios and what they think could happen in the coming weeks.
“Any volatility will be temporary” – Christian Hantel, Vontobel Asset Management
While the result remains uncertain, Vontobel Asset Management’s Christian Hantel said a pick-up in volatility in the fixed income space might be likely.
“For the upcoming US presidential election, we would not be surprised if market volatility will increase again slightly for fixed income credit markets,” he said. “However, we also believe that any volatility will be temporary in nature, as global central banks remain a huge stabilising factor.”
Hantel, manager of the $663.6m Vontobel Global Corporate Bond Mid Yield fund, said the Federal Reserve’s decision to become an active buyer of corporate bonds had helped credit spreads to rally.
The market has also been supported by significant inflows into global corporate bonds from investors looking for positive yields, he added.
On sector positioning, the Vontobel manager said he would not likely make any changes until the political agendas of Biden and Trump were known.
“Since Q1 2020, we’ve spent a particular focus on the resilience of company’s balance sheet and liquidity profile in order to avoid negative surprises,” he said. “However, as companies across sectors issued so many bonds in H1 2020, bond tenders [buy backs] could be a theme for the coming months, disregarding the US election.”
“The lead-up to the election should be uneventful” – Andrew Pease, Russell Investments
Russell Investments’ Andrew Pease said he does not anticipate any significant changes ahead of the election, “but a significant drawdown accompanied by investor panic could be an opportunity to add more risk”.
“The most interesting phase could come after the election when markets start sizing up regulation and tax policy agendas and evaluate key administration appointments,” said Pease, global head of investment strategy for Russell Investments.
“A Democrat clean sweep [in presidential and congressional elections] would create the risk of significant changes. The lead-up to the election should be uneventful with a tight contest keeping investors side-lined.”
Regardless of the outcome, Peas said the next market phase would likely be a rotation away from the technology stocks that have led markets higher in recent years and have been some of the strongest performers of the Covid-19 rally.
Instead, he said cyclical and value names are likely to lead in the next phase as the yield curve continues to steepen.
“Too early to speculate” – Neil Mehta, BlueBay Asset Management
Markets have already begun to price-in increased risk around the US election, according to Neil Mehta, assistant portfolio manager at BlueBay Asset Management.
Trump’s tough law & order stance and the recovering US economy has closed the gap with Biden, said Mehta, stoking fears that a close election could lead to a contested and drawn-out confirmation process.
“In terms of positioning ahead of the event, we think it is too early to speculate on an outcome, as we have seen in the past that polling and sentiment becomes very fluid as we move closer to the election,” he said.
“The first presidential debate at the end of September is a key event in that respect.”
“Biden or Trump? Gold should perform well under either” – Rob Crayfourd, New City Investment Managers
“While polls suggest Biden holds a material lead, we are considerably less certain, given the similarities to the previous election,” said Rob Crayfourd (pictured), portfolio manager of Golden Prospect Precious Metals investment trust. 
Nevertheless, given that both candidates are likely to press ahead with more stimulus for the economy, the case for owning gold remains strong given that the primary driver of prices is easy monetary policy.
“Trump’s approach is to attack the Fed for not being accommodative enough, while Biden is seeking to combat climate change, reduce wealth disparity and advance liberal causes, while promising major fiscal stimulus through public works and, thus, higher debt,” said Crayfourd.
“With both candidates looking to outspend each other, the case for owning gold looks likely to improve further.”