Why the US election matters to UK investors

As politicians around the world continue to focus on navigating the coronavirus crisis, the US has been somewhat distracted by a bitter battle for the presidency, with all the usual bluster and drama that goes along with that. But while it’s a fascinating pantomime to watch, to what degree should we care about the outcome?
With 24% share of the global economy (China is second with 16%),[i] the US has always been enormously powerful and influential on the international stage. When Americans are prosperous, the rest of the world benefits because they are such an important exporter and importer of global goods and services. In fact, love him or loathe him and before Covid-19 disrupted his plans, Trump’s pro-business policies helped buoy the global economy when many commentators felt a recession was looming.
This election is important not just because of the immediate crisis at large, but also because the world stands on the brink of significant change and opportunity in socio-economics, energy, healthcare, and artificial intelligence. With the right decision-making, the US could become a driver of these megatrends. As a result, our focus is not on the election itself or its immediate aftermath. If Trump’s shock election in 2016 and the unexpected vote for Brexit are anything to go by, any market reaction – positive or negative – is likely to be short-lived. What does interest us, though, are key policy decisions that could yield longer-term investment opportunities or change our thinking on existing stock picks.

  • Trade and foreign policy


    Biden has pledged $400 billion to buy American goods and has called for the federal government to invest $300 billion in US-made materials, services, research and technology. He has promised to make America less reliant on the Chinese but has indicated that he would like to improve relations with NATO allies, and form coalitions with other democracies to put further pressure on China.


    Trump’s ‘America first’ policies during his first term succeeded in creating jobs for Americans. His stance on trade with China continues to protect local manufacturers from foreign competition, although the US still has a huge trade deficit. Trump plans to redress this balance by incentivising US firms to move their Chinese factories back to US soil.

    The Sanlam View

    There’s no question that trade agreements have not always been stacked in the US’s favour. Investors are eager to see confidence restored in the US dollar, and if that means becoming less reliant on China, they will largely support that. The prospect of renewed international coalitions could prove interesting – especially for a post-Brexit UK.

  • Climate change & the green economy


    Biden has taken a contrary view to Trump on climate change and the green economy opportunity. He has pledged to invest $2 trillion in green energy arguing that it will future-proof jobs for lower-income workers. He will re-join the Paris Climate Agreement and is proposing a $1.7 trillion federal investment in green technology research to ensure the US reaches net-zero emissions by 2050.


    It’s fair to say that climate change and the green economy are not high on Trump’s agenda. He continues to stand by his decision to withdraw from the Paris Climate Agreement and is in favour of further oil and gas drilling, recently giving the go-ahead to drill in Alaska’s Arctic National Wildlife Refuge.

    The Sanlam View

    A change in US policy on climate change and the green economy could be very interesting for investors. Developing green technology is a prudent investment for the future, not only because it will create jobs and generate revenue in years to come, but also because innovative technologies can be exported around the world. At the moment, the US looks set to miss out on much of the green opportunity.

  • Pro-business policies


    Biden proposes to withdraw Trump’s tax cuts for businesses, redeploying this money into education and increasing social security payments and the minimum wage.


    Trump is famously pro- business, and this forms a key part of his mantra to ‘make America great again’. He will continue to encourage US companies to base themselves on American soil by keeping taxes low and giving grants for new facilities.

    The Sanlam View

    Trump’s corporate tax cuts made US companies attractive to investors. A more left-wing view on business might make investors nervous, especially if the US dollar continues to weaken.

  • Healthcare


    A Democratic sweep would lead to increased Medicaid (healthcare for people on very low incomes) during the recession and an expansion of the Affordable Care Act to more individuals. Medicare (healthcare for people age 65+ or those with a disability) could be provided to people from 60 years old. Stimulus policies could include widespread funding for coronavirus testing, vaccine distribution and purchase of personal protective equipment.


    Trump will continue to focus on repealing and replacing the Affordable Care Act. Importantly, a Trump re-election is unlikely to involve the Republicans controlling both houses, which will limit policy changes. There will be continued focus on drug-pricing policy and transparency.

    The Sanlam View

    Under a Biden administration with a Democratic Senate majority, we would expect the focus to be on passing legislation to fix and expand the Affordable Care Act. On drug-pricing policy, we could potentially see direct negotiations for a subset of drugs for Medicare or increased transparency (building on the Senate finance bill).

Do we have a strong view on who should win?

As investors, we don’t have a strong view on who will win the election. We have reviewed any holdings that are exposed to increases in tax under Biden, and we took steps to mitigate this risk some months ago. Outside of this, we are not positioning portfolios for or against a particular outcome, and we don’t plan to make any knee-jerk reactions in the event of a short-term market correction.

That’s not to say the result isn’t important to us. Anything that potentially changes the economic and political landscape is of utmost importance – especially since it affects one of the world’s largest and strongest economies. But any investment decision should be made in a considered and well-researched manner. What is important is our long-term, quality-driven approach to investing, and the US will continue to play an important part in that, whoever is in power.

[i] Based on GDP. Source: www.investopedia.com/insights/worlds-top-economies/

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