- The US Election polls continue to suggest a very tight election.
- US Treasury yields have been rising recently as prices have fallen.
- With so much uncertainty, diverse investment portfolios are the best option.
Hal Cook, senior investment analyst, Hargreaves Lansdown:
“The US election is upon us. The polls have swayed a fair bit over the year but have been pretty tight ever since Kamala Harris became the Democratic nominee. They remain close overall going into election day, with the focus on the swing states that are expected to decide the outcome. More recently, polling has shown a move towards Donald Trump in these areas. This has meant investors becoming increasingly focused on the implications of a Trump clean sweep – where he wins the Presidency, and the Republicans win majorities in both the House of Representatives and the Senate. It’s widely expected that the Republicans will win the Senate, with the races to win the Presidency and the House of Representatives both being very close.
If there is a Republican clean sweep, it’ll be much easier for Trump to enact policy changes. Expectations are that many of his policies would be inflationary, potentially reducing the Federal Reserve’s ability to cut interest rates. And that’s without trying to understand how the potential geopolitical impacts of a clean sweep might impact markets.
This has meant that yields on US Treasuries have increased, and prices have fallen over the last six weeks or so. The 10-year US Treasury yield hit a low of around 3.6% in mid-September, it’s back up to about 4.3% at the time of writing. It’s hard to know where it could go from here. Sometimes it’s the not knowing that causes market jitters, it’s the fear of a particular outcome.
With the election being an effective coin-toss, betting on a specific outcome doesn’t seem sensible. Instead, remember that diversification is your friend.
Funds to diversify your portfolio
Invesco Tactical Bond
With likely bond market volatility, a diversified global bond fund could be a good option. Stuart Edwards and Julien Eberhardt invest flexibly, in all types of bonds. They aim to provide some income and growth over the long-term, with a focus on keeping losses during periods of market stress to a minimum.
Their focus on limiting losses has meant that their fund has typically had less ups and downs than the wider market. Their active management approach also means they can stay away from areas of bond markets that they think could perform poorly, and means the fund is highly diversified.
We think this is a great option to invest in a fund with experienced managers who are able to act quickly to take advantage of the global opportunities that come from market volatility.
Artemis Global Income
If it’s shares you are interested in, perhaps look to a fund that invests globally without as big a focus on the US. Jacob De Tusch-Lec has managed this fund since launch in July 2010 and he aims to deliver income and growth by investing in companies from around the world. He favours developed markets and tends to invest more in the UK and Europe than global stock market indices.
He conducts detailed company analysis to identify those with a healthy amount of cash to either pay out dividends or buy back shares. As a natural contrarian, De Tusch-Lec is not afraid to invest in out-of-favour companies with recovery potential alongside higher-risk smaller companies.
A focus on companies perceived to be undervalued is the overriding style which means the fund could work well alongside more growth-focused funds.”
