Investors nerves on edge as US election approaches

BNZ Private Bank Analyst, Katie Thompson, gives us an overview of the current state of play and what you can expect to see in financial markets in the lead up to the US election day.

The US presidential election will take place in just over four weeks, on 8 November 2016. The thought of Republican candidate, Donald Trump, becoming the president of the world’s largest economy is making investors nervous, and setting the stage for more market volatility, given his unconventional views and lack of clear policy direction.

Investors, however, have a better idea about Democrat candidate, Hillary Clinton’s policies, so any sign that she’s closer to the presidency is a boost for financial markets. And we saw this when markets dropped in the lead up to the first of three presidential debates that took place earlier last week, then quickly recovered following Clinton’s stronger performance. The two candidates will go head to head again in the second presidential debate this weekend.

But let’s not be quick to dismiss Trump. The Republican candidate is still considered a serious contender for the presidency – so it can still go either way. According to a BBC poll of polls, Trump trails not far behind on 44%, compared to Clinton’s 49% as shown in the graph below.

blog-us-politics-image-v2The BBC poll of polls looks at the five most recent national polls and takes the median value. Source: http://www.bbc.com/news/election-us-2016-37450661

We expect to see more volatility in the lead-up to election day and during this time, you may see your BNZ KiwiSaver Scheme funds experience greater ups-and-downs than usual.

It’s our view that whoever our fellow Americans vote in as their commander-in-chief, it will have little long-term impact on financial market returns. But, as with any event that may cause short-term market volatility, it’s important that you stay focused on your long-term goals and the benefits of investing in a diversified fund.

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