Post-Election Investment Strategies: What Investors Need to Know

America, the world’s largest national economy and leading global trader, recently held elections, and investors around the world are closely monitoring the outcome.

Politics and elections affect the stock market by introducing policy uncertainty and influencing investor sentiment. Investors anticipate possible changes in taxes, regulations, and spending, especially as candidates' positions become clearer. As elections take place, market volatility often increases, with stocks fluctuating in response to polls and debates.

Key impacts on the stock market include:

• Increased volatility during elections: Polls and debates create market swings.
• Sector-specific reactions to policies: Industries adjust to anticipated regulatory shifts.
• Effects of political stability or instability: Uncertainty can reduce investor confidence.

When are this year's results expected?

On Wednesday Donald Trump declared victory in the U.S. presidential election; receiving congratulations from various global leaders as projected results in key swing states like North Carolina, Georgia, Pennsylvania, and Wisconsin were in his favour.

Source: Google

Trump becomes the first former president to return to the White House in over 130 years, calling it "the golden age of America." Elon Musk, one of the biggest donors to Trump’s campaign and the world’s richest man, shared his support as results came in, posting positive messages on X.

Official results, according to the BBC, may take days or weeks to be confirmed, with potential legal challenges even after Trump's victory. The president-elect will be sworn in as president following an inauguration in January 2025

What can we expect after the elections?

Uncertainty around political transitions or disputes can sometimes result in market turbulence. After the elections, the market could adjust based on the new administration's priorities. Pro-business policies might drive gains, while increased regulation can lead to declines, particularly in impacted sectors.

In October, BlackRock highlighted the U.S. economy's resilience amid global uncertainty, offering strong investment opportunities. They recommend evolving the traditional 60-40 portfolio to a 40-50-10 model: 40% growth-focused equities, 50% optimized fixed income, and 10% in uncorrelated private deals like credit and real estate, for a more resilient, high-potential portfolio.

Fidelity Investments reports that U.S. stocks have averaged 9.1% returns in election years since 1950, but elections aren’t major market drivers. Political cycles impact emerging markets more than the U.S., and betting on sector-specific gains tied to elections is risky due to inconsistent patterns.

On Wednesday, as the news broke, shares of Tesla surged by over 14% in pre-market trading amid expectations of a Donald Trump win. Musk, a key Trump supporter, was promised a role leading a government efficiency commission if Trump is elected. That said, Elon Musk and his businesses could become beneficiaries of the new Trump administration, benefiting from potential regulatory changes, lower taxes, and more government contracts for SpaceX. Some lawmakers, speaking anonymously, worry he may influence U.S. policy to favour his financial interests.

Duane Gilbert, Chief Investment Officer at EasyRetire, adds: “Trump's policies are pro-U.S. business, which is good for U.S. equity markets. He is giving another leg to the U.S. equity market rally. Republicans have the Senate and look set to take the House. This is an environment where Trump will face no resistance in passing his policies. Chinese equities are down and will likely come under further pressure from Trump’s stance against unfair Chinese trade practices.”

The US dollar has surged, and Bitcoin hit a record high as Donald Trump is projected to win the presidency, with expectations of tax cuts and adjusting tariffs under his second term. This election result, according to BBC, is poised to significantly impact the global economy. The Republican Party also appears likely to control the Senate, though votes remain to be counted.

Conclusion

As the U.S. election unfolds, investors are closely watching for policy changes that could impact taxes, regulations, and spending, which may drive market volatility. For those looking to navigate this period, maintaining a long-term perspective and setting clear goals are essential strategies. Rather than attempting to time the market, spending consistent time in the market can be a better strategy.

EasyEquities also offers ETNs (Exchange-Traded Notes) that provide exposure to currency pairs like USD/ZAR, allowing investors to hedge against currency fluctuations. This can be particularly beneficial during periods of political and economic uncertainty, offering a way to diversify and potentially stabilize returns amid a shifting landscape.

Last week, the South African Reserve Bank (SARB) kept the repo rate at 8.25% for the seventh consecutive meeting in July 2024, as expected. Two policymakers favoured a 25 basis point cut. 

In the intricate world of finance, money is the lifeblood that fuels economies, shapes markets, and drives innovation. Yet, how much do we truly understand the journey of money from its inception to its role in our daily lives?

The year 2024 is poised to become a landmark moment in history, with over 2 billion people worldwide preparing to cast their votes in elections spanning countries like the US, India, the European Union, Mexico, and South Africa, as highlighted by the World Economic Forum.