The myriad of predictions regarding the market based on the outcome of the upcoming United States presidential elections is in no short supply as of late. However, investors should cautiously look past the initial aftermath and instead focus on associated risks and outcomes in their appropriate context. This will avoid buying or betting against the elections rashly as a delayed result in the polls will cause increased investing uncertainty.
This can be achieved by classifying assets in relation to the effect the elections will have on them. Certain markets will bear little to no impact from the election outcome. Key examples might be being cautious on oil, and bearish on pound and dollar positions. Opposingly, other assets will be greatly affected by the election along with subsequent changes in policies. A prime example of this could be seen in the S&P 500, which could see a dip given the various types of divided or unified government scenarios (Thin Red Line, Blue Tide, Blue Sweep, or Red Redux).
Ultimately, a unified government might be ideal for investors, be it Democratic or Republican. This follows that such scenarios would promote a higher net fiscal impulse which would drive back-end rates higher.
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