Please note, we did run into some audio difficulties for the first 4 minutes of Jeannette’s portion of the video, they clear up at the 19:19 minute mark.
Below is a quick synopsis of what was said during the inaudible time.
- Markets prefer consistency from elections. If we were to have a status quo election result, with Trump winning the presidency and the Democrats holding onto the House and the Republicans holding onto the Senate, we would expect higher equity market returns as markets have tended to favor re-elected presidents.
- If Biden were to win the presidency and the Democrats were to sweep in the election (winning the House and Senate as well), we would expect lower market returns than under the status quo scenario especially as the market looks at the tax increases that Biden has proposed and the hit to earnings of those proposed corporate tax changes.
- Biden could also win the presidency, but Republicans could keep control of the Senate. We think that is a bullish set-up for stocks since you would not get the corporate tax increases and you might get better global relations as Biden is likely to take a tough line on China, but less so through tariffs and more so in a multilateral fashion. One caveat though is that Biden can still ban buybacks and impose other financial regulation that could be negative for the markets in that scenario.