Following Joe Biden's victory over the weekend to become the 46th president of the United States, we round up some of the industry comment on what his win signifies for the industry, and for investors.
Stuart Clark, portfolio manager at Quilter Investors, commented: "After days of waiting for the mail to arrive, over the weekend we finally got a result in the Presidential election. So long as there are no legal surprises over the coming weeks the US has a new president-elect in the shape of Democrat Joe Biden. We suspect this won't be the last we hear of the Trumps but for now one element of the uncertainty is resolved. One question to be asking in the future may be which, if any, of the family appears on the GOP ticket in 2024.
"That said, the US political system continues to throw curveballs when least expected. There will be a run-off election in Georgia for the remaining Senate seats in January and this is likely to decide whether or not Biden can enact his agenda and push through the policies he promised to introduce. Without it, we very much see the status quo dominating once again.
For now, however, markets seem to be embracing the news and have not been too unsettled by the lack of clarity last week brought. For long-term investors it goes to show that this election is a timely reminder to block out the noise and not be swayed by certain political events."
"For now, however, markets seem to be embracing the news and have not been too unsettled by the lack of clarity last week brought. For long-term investors it goes to show that this election is a timely reminder to block out the noise and not be swayed by certain political events."
"Looking at what this means for investors, it is likely that the extent of tax reforms, healthcare or the move to make the economy more environmentally friendly will have to be scaled back given the lack of Republican support. Infrastructure remains an area where we might see some cross party collaboration and an area that should benefit investors over the next four years. We should also now begin to see some movement on a new stimulus package as part of the covid-19 recovery, but it is unlikely this will be the amount the Democrats would have been hoping for."
Brendan Mulhern, economist and strategist for the BNY Mellon Global Real Return Fund at Newton Investment Management, said: "With Biden named president-elect over the weekend it brings to an end the period of election-induced uncertainty, albeit with the promise of legal challenges from the Trump administration."
"Perhaps most important for investors however is the ongoing battle for the Senate. Currently a tie, with 48 Republicans and 48 Democrats. Four seats are still outstanding: In addition to the Georgia runoffs, Republicans are leading and expected to win in Alaska and North Carolina. At this juncture the consensus view is that the Republicans will maintain control of the Senate, thereby preventing a Democratic ‘clean sweep'. Should this come to pass, Republicans will have greater scope to limit the Biden administration."
"This calls into question whether the new administration will be able to implement the policies outlined ahead of the election that formed a ‘Green New Deal'. It also limits the ability of the new administration to implement new business regulation, in particular on Big Tech. As such, as things stand today it is arguably the best possible outcome with respect to the equity market."
Furthermore, Democrats and Republicans are already indicating a willingness to work together to pass further fiscal support for the economy, with a lack of progress prior to the election a major concern for investors given the worsening covid-19 situation. With election out of the way, investor attention is likely to turn to how Biden plans to tackle the virus.
"However, in the near term markets will continue to closely follow President Trump between now and Biden's inauguration."
Edward Smith, of Rathbones, said: "We think there's a strong argument to be made for a Biden presidency with a split Congress being a very market-friendly outcome over the medium term. Little changes in terms of the scale of the fiscal or monetary policy support, relative to the status quo, but foreign and trade policy uncertainty will ease significantly.
"The substance of Biden's trade policy is similar to Trump's, at least on China, but the style will change, and the maverick, unpredictable approach will likely be replaced with more measured, rules-based tactics that cooperate once again with the international institutions that have presided over decades of strong corporate profitability."
This change may benefit non-US equity markets more than US markets. We're global, multi-asset investors and from that perspective this election is about whether global policy uncertainty will continue its dramatic ascent of recent years. Huge increases in uncertainty, particularly around what American protectionism/unilateralism means for foreign export-oriented economies, have augmented the outperformance of US versus global equities and the long upward trend in the dollar.
"Uncertainty has become greater outside of the US than within it because the US is a more insular economy, with a lower ratio of trade to GDP. In our view, that's benefited US assets relative to non-US assets because its stock market is less cyclical than many others and less sensitive to the global trade cycle. And the dollar has benefited from its safe-haven status."
Keir Ashman, pensions and investments specialist at Bancroft Wealth, said the impact could be most significant in the realm of ESG: "While there are many sections of American - and global - life that will be impacted by Joe Biden's victory over Trump, one major area is the soon-to-be POTUS's well-known commitment to clean energy and environmental justice. For instance, Biden intends to not only recommit the US to the Paris Agreement which Trump pulled America out of, but has said that he intends to push every major country to become even more ambitious in their climate targets."
"From an investor's point of view, this adds further credibility to more environmentally- and ethically-minded investments, which have been growing in popularity for some time, and particularly over the last 12 months. And while the Paris Agreement, and other climate commitments, have long-term goals in mind that require major behavioural shifts, environmentally friendly businesses are still likely to benefit from an influx of capital over the longer term."
Guillaume Mascotto, vice president, head of ESG and investment stewardship at American Century Investments, also focused on ESG implications: "While the US will likely remain structurally divided on constitutional issues, under president-elect Joe Biden, ESG observers may expect the U.S. to rejoin the Paris climate deal, restore methane/fracking regulation on domestic oil and gas drilling, and re-enact federal GHG emissions-reduction initiatives such as the Clean Power Plan."
"Biden's stance on climate change is also likely to be echoed by a Democratic-controlled Congress, resulting in a strengthening of the federal government's role in energy and environmental policy. While the appeal of investing in intermittent renewable energy assets will continue irrespective of regulatory developments as technological learning curves improve, an abrupt switch away from fossil fuels is likely to be limited as a result of continued low natural gas prices, infrastructural obstacles and possible push-back on behalf of a Republican-controlled Senate."
"At the same time, Biden has voiced his support to promote a gradual energy transition, in which natural gas (and by extension the controversial practice of fracking) is likely to remain categorized as a "transitional fuel". As such, we believe the focus on environmental protection and operational health and safety will continue to be material issues at the forefront of the fracking debate.
"We also expect interest in ESG investing to continue gaining momentum beyond political and regulatory developments such as the Department of Labor's proposed rule on limiting ESG investment options for pension plans. This corresponds with deep shifts in investor mindset and the growing linkage between ESG issues and their economic impacts. The pandemic and its material human, economic and financial costs will likely continue to support the notion that the environment, public health and the global economy intertwine. Tackling the pandemic will certainly remain an issue of priority order for Biden's administration."
"This should also continue to position healthcare as a key investment theme in 2021. That said, we believe the top ESG issue in 2021 (and beyond) will be the implications of transitioning toward a circular economy. The key challenge for the Biden administration will be to maximize the incentives to scale advanced and knowledge-intensive renewable energy/closed-loop solutions while balancing social and economic considerations."
"Ultimately, adapting our system to address this issue can be achieved only through a sustained effort on the part of business leaders, policymakers, and their constituents to redefine traditional measures of productivity, wealth and well-being."
Rising incomes in Asia will probably be the most important investment story of the 2020s. Asia is home to 60% of the world's population, with both China and India each accounting for about 18% of the global total.