US election: What can investors expect from a Biden or Trump victory?

The US presidential election of 2020 is a messy and momentous affair. It’s hard to look away and investors won’t want to.

Long-term investors are advised to follow conventional wisdom and steer their portfolio on a course that won’t be upended by either candidate triumphing on 3 November. 

That is despite a third scenario looming this time, which is a contested result and Republican President Donald Trump making good on his threat to reject any outcome where he doesn’t win.

Since his rival, Joe Biden, currently looks set to beat him according to the latest polls and even retake the Senate for the Democrats, we could be in for a chaotic aftermath that outdoes the Bush versus Gore cliffhanger election of 2000.

Trump vs Biden: Could we be heading for a constitutional crisis like after the Bush vs Gore battle for the White House in 2000?

But this time the ballot is complicated by holding an election in a country gripped by Covid-19 – making postal voting both crucial and controversial – and it’s still more than possible that Trump could come from behind and hold onto the presidency.

‘It doesn’t make much sense for investors to try and predict who will be in the White House in 2021 as general elections are notoriously difficult to predict – just think back to Trump’s victory in 2016,’ says Adrian Lowcock, head of personal investing at Willis Owen.

He adds: ‘It is such a binary result that if you get the outcome wrong it could have a significant detrimental impact on your investments. 

‘Of course even getting the result right might not lead to markets behaving the way you would expect.’

Neil Wilson, chief market analyst for, says: ‘The only thing the market wants is to get the election out of the way – the only real danger would be a long period of legal disputes post-election.

‘Veiled threats by Trump to not accept a Biden win are probably over-analysed. The Supreme Court (and Secret Service) would see to that.’

‘It turns out the most antagonistic election in a generation for the people of America might well end up merely a short term ripple when it comes to markets, given everything else they have to contend with in the long term.’

Donald Trump: Republican President is threatening to reject any outcome where he doesn't win

Donald Trump: Republican President is threatening to reject any outcome where he doesn’t win

That said, in terms of the more immediate issues investors should bear in mind, Trump is set to maintain or extend corporate tax cuts, cut business red tape and protect the fossil fuel energy industry if he wins.

Biden would probably try to enact a massive green jobs and infrastructure programme, especially if he wins the Senate, curb big tech companies, partially roll back tax cuts and seek to resolve the trade war with China.

Either Biden or Trump is likely to pass a massive economic stimulus package to help people and businesses stricken by Covid-10. 

And the Federal Reserve looks minded to continue its supportive stance towards the economy and markets, which have bounced back since the pandemic crash in the spring.

We round up investing experts’ views on the key issues and their US fund tips below. 

What should investors consider when investing in the US?

S&P 500 is dominated by large tech companies: ‘The US markets look expensive as a few large companies’ share prices have dominated the market and led leading benchmarks to reach new highs or recover to levels before the crisis,’ says Lowcock.

‘On the surface, it looks like the whole market has recovered. 

Dow Jones: Top US index has recovered from early 2020 slump (Source: Yahoo! Finance)

Dow Jones: Top US index has recovered from early 2020 slump (Source: Yahoo! Finance)

‘This is not the case, just as in other regions many company stocks are trading at subdued levels and there are opportunities within the US market to invest in some strong brands.’

He says the next US stimulus programme is likely to be worth in the region of $2trillion, most of it coming in 2021, and what it does to support people’s wages will be important.

‘With the huge amount of stimulus expected in 2021 we should expect the US economy to roar back as it has so often done to the surprise of investors.’

This is Money recently reported that five tech giants – Amazon, Alphabet, Apple, Facebook and Microsoft – now make up something between a fifth and a quarter of the leading US blue-chip index, the S&P 500. 

This has sparked concerns that falls in their share prices could send the wider market into a tailspin.

Joe Biden: Polls show a strong lead for the Democratic candidate, but Trump could still pull off a surprise like in 2016

Joe Biden: Polls show a strong lead for the Democratic candidate, but Trump could still pull off a surprise like in 2016

Jason Hollands, managing director of Tilney Investment Management Services, notes there is growing scrutiny of the tech giants from across the US political spectrum on competition, misinformation and privacy.

A bipartisan Congressional report doesn’t mince its words, accusing Amazon, Apple, Facebook and Google of turning into ‘the kinds of monopolies we last saw in the era of oil barons and railroad tycoons’,’ he says. 

With the huge amount of stimulus expected in 2021 we should expect the US economy to roar back as it has so often done to the surprise of investors.

Adrian Lowcock – Willis Owen 

It calls for sweeping changes to clip their wings and possibly break them up.

‘Notably, it has been the Democrats who have been particularly hard line and therefore if we see a clean sweep in the elections, the seemingly unassailable position of the “new economy” mega-caps could be under threat. 

‘That’s quite important when you consider they ballooning influence in the S&P 500.

‘I’m not saying these aren’t great companies, but valuations have rocketed as investor have chased performance.

‘Clearly these companies have benefited during the pandemic as people have worked from home, increasingly shopped, entertained and socialised online but it would be naïve to project similar growth into the future as ultimately the pandemic will pass.’

Smaller companies are cheaper and hold potential: The small players are still pretty large by British standards and are being overlooked, according to Lowcock.

Jason Hollands: There is growing scrutiny of the US tech giants from across the US political spectrum

Jason Hollands: There is growing scrutiny of the US tech giants from across the US political spectrum

‘This is typical in an economic downturn as they are riskier and more sensitive to a slowing US economy. 

‘They have also lagged in the rebound as investors focused on the tech giants and big getting bigger mantra.

‘However, smaller companies have been recipients of financial support during the crisis and the shares tend to begin to perform when investors can see the end of the recession and as recovery is in sight.’

Lowock says valuations in this part of the US market are not expensive because Covid-19 and the looming US presidential election mean investors are adopting a wait-and-see approach, but the potential is there for them once these factors are resolved and a stimulus programme is implemented.

Depreciating US dollar is negative for UK investors: The greenback is weakening as Government spending has rocketed and is likely to ratchet up further under a new presidential administration, says Hollands.

He flags this as a key risk for UK investors, who have shunned domestic stocks since the Brexit vote and favoured heavily US-weighted global funds.

‘Most global equity funds do not hedge currency exposure back into sterling,’ he says. ‘Currency moves have already had a profound impact on returns, but these have largely been masked from UK investors by the strong underlying performance of US shares, driven by the big ‘new economy’ giants.’

He goes on: ‘Should a continued depreciation of the US dollar continue to play out, this would have potential consequences for the largest UK listed companies too, as UK large-cap stocks have high exposure to dollar earnings.

‘However, this might partially be mitigated by some businesses taking out their own currency hedges on their dollar exposure.’

Hollands says in this scenario, UK funds with a bias to small and mid-cap equities could prove move defensive for sterling investors. 

He adds that funds with relatively low dollar exposure compared to the wider UK market include Tellworth UK Smaller Companies, Fidelity Special Situations and JO Hambro UK Dynamic.

Federal Reserve could be starting to embrace ‘Modern Monetary Theory’: The powerful US central bank signalled it was willing to make unlimited bond purchases in late March.

Adrian Lowcock: Even calling the result right might not lead to markets behaving the way you would expect

Adrian Lowcock: Even calling the result right might not lead to markets behaving the way you would expect

And this summer, it announced a key policy shift to keep interest rates near zero even after inflation exceeds the 2 per cent target level. 

Neil Wilson of says the Fed is taking a more practical approach than in the past when it comes to maximum employment and inflation.

‘Instead of saying that the economic outcomes need to fit its models – which have always been nothing more than a best guess – it will let the outcomes drive the policy.’ he explains.

Wilson suggests that this could be a step towards fully embracing Modern Monetary Theory, although chairman Jerome Powell has rejected it in the past.

This theory holds that governments which issue their own currency shouldn’t worry about deficits unless inflation gets out of control, and should pursue full employment.

‘Powell has embraced a central tenet of MMT – why should millions of people be thrown on the economic scrapheap and left unemployed as the price to pay for low inflation,’ says Wilson.

‘Under a Democrat-led Congress and White House, MMT proponents will gain a louder voice, with implications for federal economic policy.’

Wilson adds: ‘Biden may not have expressed much support for MMT – in fact he was once a fiscal hawk in the old style – but under a Democrat Congress and White House there would be no rush to reduce the deficit.

‘In fact, Biden’s economic stimulus plans entail more borrowing. Whilst it is a stretch to suggest that Biden is a supporter of MMT, the economic and social backdrop has changed drastically in recent years and it is gaining traction in more corners of the Democrat machine.’

Which US funds could you consider?

Jason Hollands of Tilney tips

Dodge & Cox Worldwide US Stock (Ongoing charge: 0.63 per cent)

This fund is managed by long-established San Francisco based group Dodge & Cox.

It invests in blue chip US listed companies with strong balance sheets but with a value-style bias, targeting solid business franchises where the current valuation does not reflect the long-term opportunity and then to hold for the long-term.

This is fundamentally a conservative approach.

Invesco FTSE RAFI US 1000 UCITS ETF (Ongoing charge: 0.39 per cent)

An option for passive fans who are concerned about being too exposed to big tech through traditional tracker funds.

This owns the 1,000 largest US firms (including the tech giants) but weights exposure based on four factors: revenues, dividends, net assets and cash flow.

What is an ongoing charge? 

The ongoing charge is the investing industry’s standard measure of fund running costs.

The bigger it is, the costlier the fund is to run.

The ongoing charge figure can be found in the Key Investor Information Document (KIID) for any fund, usually at the top of page two.

To track down these documents, put the fund name and ‘KIID’ together in an internet search engine. Read more here about investment charges.

The result is broad exposure to the market with low costs, but a portfolio more skewed in favour of businesses on reasonable valuations.

Artemis US Absolute Return (Ongoing charge: 0.89 per cent)

 For defensive investors, this has a long/short strategy that allows it to both invest in companies the managers believe will perform well but also take positions that will enable it to profit from stocks the managers believe will perform poorly.

The overall goal is making positive returns over three years, whichever direction the markets head. 

Adrian Lowcock of Willis Owen tips

Artemis US Select (Ongoing charge: 0.87 per cent)

 Cormac Weldon looks for economically sensitive companies with a focus on businesses that perform best during the growth phase of the economy.

He has a portfolio of 40-60 companies where he believes the potential returns outweigh the risk of a potential loss. 

When analysing companies he looks at the impact different scenarios may have on a company to assess the risks.

JPM US Equity Income (Ongoing charge: 0.93 per cent)

 Clare Hart focuses on companies with relatively attractive dividend yields and high levels of dividend cover.

She invests in businesses with durable franchises, consistent earnings, high return on invested capital and strong management. 

Hart pays close attention to capital preservation and tends to favour companies with a sustainable advantage.

Free investing guides

Schroder US Smaller Companies (Ongoing charge: 0.92 per cent)

Bob Kaynor is a cautious investor and considers avoiding losses the most effective way to grow capital over the longer term.

The investments are selected based on the teams’ view of the business model, valuation and company financials.

The fund invests in mis-priced growth companies, steady eddies with stable growth and turnaround companies.

Watch the below Investing Show from August 2020 – why has the US stock market soared ahead of the UK: 

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