{"id":20158,"date":"2020-11-06T09:45:41","date_gmt":"2020-11-06T14:45:41","guid":{"rendered":"https:\/\/www.benefitscanada.com\/news\/what-does-u-s-election-uncertainty-mean-for-institutional-investors-152116"},"modified":"2020-11-06T09:45:41","modified_gmt":"2020-11-06T14:45:41","slug":"what-u-s-election-uncertainty-means-for-institutional-investors","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2020\/11\/06\/what-u-s-election-uncertainty-means-for-institutional-investors\/","title":{"rendered":"What U.S. election uncertainty means for institutional investors"},"content":{"rendered":"
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Melissa Dunne<\/span> | November 6, 2020 <\/p>\n

Whether Joe Biden or Donald Trump ultimately wins the White House, the stock market is already a clear winner this week.<\/p>\n

While there were fears that a longer than usual wait to determine the winner of the U.S. presidential race would lead to wild market volatility, that didn\u2019t come to pass. But signs were there over the past few months that the bull market was going to keep galloping forward despite stark political divisions in the U.S.<\/p>\n

\u201cIn hindsight \u2014 obviously, I don\u2019t work for Hindsight Capital \u2014 but in hindsight every market, and risk markets in general, were going to go up no matter what,\u201d says Robert Almeida, investment officer and global investment strategist at MFS Investment Management. <\/p>\n

Read: U.S. markets betting on Biden, investors preparing for energy sector impacts<\/a><\/strong><\/p>\n

\u201cWhat happened to volatility in the latter part of Wednesday and Thursday? I think that this feels and looks like a late-cycle dynamic where the level of investor demand is outweighing the level of investment supply \u2014 and the reaction function to that is materially higher prices until there aren\u2019t.\u201d<\/p>\n

A delayed result to the election was always likely since the coronavirus pandemic meant a much higher mail-in voting rate than in previous elections, but prolonged uncertainty about who the next U.S. president could drive prices down.<\/p>\n

\u201cLitigation, like there was in 2000, could take weeks to resolve \u2014 it was Dec. 13 until there was an outcome [in 2000],\u201d said Charles Meyers, chairman of Signum Global Advisors, during the Canadian Investment Review<\/em>\u2019s virtual Investment Innovation Conference on Wednesday.<\/p>\n

\u201cThe U.S. equity market sold off eight per cent and I would argue today, in a scenario like that and that kind of delay, the market will sell off more because, first of all, we\u2019re at near-time highs and, secondly, given the actors here . . .  particularly Donald Trump, it will be a much more volatile period during that undecided or contested period, so I worry about that.\u201d<\/p>\n

Read: What do the U.S. midterm results mean for institutional investors?<\/a><\/strong><\/p>\n

While Trump has already filed many legal challenges, it seemed unlikely as of Friday morning that a weeks-long battle like in 2000 will materialize, but the battle for the U.S. Senate might drag on until January as Georgia may have to hold run-off elections for both its seats. <\/p>\n

This week, at least, investors have decided the lack of a decisive \u201cblue wave\u201d for Biden will ultimately lead to what Japan\u2019s Mizuho Bank Ltd. dubbed \u201cGoldilocks Gridlock.\u201d Experts believe there will be less dramatic policy moves if Biden just squeaks in a photo finish and thus more certainty for institutional investors in the coming years. <\/p>\n

\u201cBefore, we thought we may get $2.5 or $2 trillion of stimulus under Biden, now it looks like less than $1 trillion,\u201d says Keith Wade, chief economist and strategist at Schroders. \u201cUnless you get a vaccine, the underlying economy could lose momentum next year, [but] it\u2019s doing OK at the moment.\u201d<\/p>\n

Earlier in the week, many stores in cities around the U.S. boarded up their windows in anticipation of unrest due to an uncertain election, but that ultimately hasn\u2019t come to pass, which also led the markets to breathe a sigh of relief.<\/p>\n

Read: A look at the investment implications of today\u2019s U.S. election<\/a><\/strong><\/p>\n

\u201cWe set the bar really low going into this week and we reached that really low bar,\u201d says Matthew Benkendorf, the chief investment officer for Vontobel\u2019s quality growth boutique. \u201cHopefully, we can raise that bar higher as we go here.\u201d<\/p>\n

While the wall-to-wall TV coverage of the vote count in yet-to-be-decided states has many feeling like they\u2019re watching the most important reality show in the world, other factors such as the ongoing pandemic and the resulting high unemployment and low interest rates will likely have a bigger impact on the markets this year and next, he notes.<\/p>\n

Indeed, there\u2019s a current disconnect between Wall Street\u2019s wins and the losses piling up on Main Streets across the U.S. If the country doesn\u2019t find a way to get the coronavirus under control soon, more struggling small businesses will have to shutter and the markets will respond, says Benkendorf, noting it\u2019s yet to be seen how institutional investors will react to prolonged economic pain.<\/p>\n

Read: 91% of institutional investors say pandemic will lead to a global recession: survey<\/a><\/strong><\/p>\n

Read the full article at BenefitsCanada.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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