US Election – how should investors act?

• The candidates have been decided and the election date is less than a month away on 5 November
• Each candidate’s policies could create opportunities and challenges for investors
• But how should investors act?

Aidan Moyle, investment analyst, Hargreaves Lansdown:

“With less than a month to go until the US election, all is still to play for. Each candidate’s policies could create opportunities and challenges for investors. Immigration has been a key topic for voters, with the democrats’ plan on reigniting their $20bn boarder bill and Trump wanting to implement mass deportation. Trump’s policies are also likely to favour fossil fuels, promoting deregulation in the oil, gas, and coal industries. This could lead to a surge in new drilling projects and infrastructure development, benefiting companies involved in traditional energy sectors. Harris, on the other hand, is expected to push for an aggressive transition to clean energy.

Continued focus on deregulation and lower taxes under Trump could bolster large banks and investment companies, while Harris could pursue stronger financial regulations, emphasising consumer protection and reducing systemic risk. In terms of taxes, Trump has expressed his desire to build on the tax cuts he put in place when he was last in office, while also cutting corporation tax to 15%. Trump believes these tax cuts can be funded from increasing tariffs. Economists have said that both tax cuts and tariffs could put upward pressure on inflation. Harris also wants to keep the tax cuts Trump implemented however, not for anyone earning over $400,000 a year where they will revert back to higher taxes. She has also pledged child tax credits and support for first time home buyers.

Tariffs have been another big topic for the nominees. Both Harris and Trump want to take a protectionist stance, trying to protect American jobs and manufacturing from overseas. Harris was part of a key decision to increase tariffs on $18bn worth of Chinese imports. Trump wants to take this further and implement a 60% tariff on all Chinese goods entering the country and 10% for goods from the rest of the world. While it might be a boost for US production, it could come with higher costs to the US consumers. This could have an impact on not just the US market, but global stocks too.

Fund picks

Investors should look through political noise and focus on valuations when topping up their US equity exposure. Many investors will already have exposure to the largest and most expensive parts of the market – megatech. Consider value-biased and smaller companies funds instead. Two we like are from Artemis and Royce.

Artemis US Smaller Companies aims to deliver long-term growth by investing in smaller US businesses. Fund manager Cormac Weldon has over 20 years of experience investing in the US and is supported by a strong team of company analysts. We like his disciplined approach to investing which leans towards growth orientated companies. Weldon sees many quality smaller companies in the industrials sector where he invests around 30% of the fund.

The FTF Royce US Smaller Companies fund aims to deliver long-term growth by investing in unloved US smaller companies, with the potential to come back into favour or recover in future. The fund’s run by Lauren Romeo who has close to 30 years industry experience investing in the US stock market. She has a strong support network of analysts and we like her disciplined approach focussing on quality companies trading at attractive valuations. Romeo focusses companies that deliver a higher return on invested capital and return on equity than the benchmark. This has led to her investing just over 30% of the fund in Industrials and little to no exposure in the lower quality Utilities and Energy sectors.”

Fund performance