Mike Coop, Head of Multi Asset Portfolio Management, EMEA, at Morningstar Investment Management, argues that investors should be wary of trying to forecast the result and implications of the US Election:
‘The US stockmarket is very overvalued and at current prices the odds are stacked against investors, compared to other stock markets. But there are pockets of value within the US market including energy, financials, consumer staples and value stocks.
‘Betting on election outcomes is a mug’s game – not only do you need to forecast the winner, you also need to forecast changes in policies they will be able to turn into law, their economic impact and whether markets are already priced for this outcome. It’s also expensive to hedge against a big fall in markets around election time.
‘This time around the economic impact of the election is even less clear. For example, any increase in corporate tax rates may be accompanied by greater fiscal spending. Any policy initiatives could be swamped by the effect of the Coronavirus, Chinese and European economic growth.
‘Instead of punting on the election, investors can deal with this uncertainty by biasing their portfolio to markets that offer better risk adjusted returns and using diversification to reduce the risk of a large fall in the value of their portfolios.’
