Investors must prepare for the impact of looming tax hikes and a potential slowdown in corporate growth plans amid the apparent growing likelihood of a Joe Biden victory in November's US Presidential election, managing director of £28bn AUM French asset manager Carmignac Didier Saint-Georges has said.
Saint-Georges, who is also a member of Carmignac's strategic investment committee, told those on a call focussed on the firm's macro outlook for the second half of 2020 that while Biden "is a very moderate man, his programme is not so moderate", and could serve to unwind half of President Donald Trump's tax cuts which saw US equity markets soar in 2017.
He said: "Something quite major is happening here. The prospects for Trump in the next election have weakened considerably - his management of the pandemic and of the economic situation, and the recent social unrest on inequality are all headwinds."
Saint-Georges also noted the "more striking" growing likelihood of a "Democratic sweep", whereby the opposition party also wins the Senate, which would mean "the possibility of [Biden] implementing his full economic programme".
He said: "The hiking of corporate income tax and capital gains tax, and all these [government spending] programmes, which are meant to really generate tax revenues, would basically unwind half of the Trump tax cuts.
"That is not insignificant, and it is certainly something which the markets might start focusing on in the coming few months if those election trends are confirmed."
Before the November election, according to Saint-Georges, the "main risk" faced by investors is that political uncertainty means that "US companies, SMEs in particular, might choose to delay hiring and capex decisions, which of course would not help the economy in the meantime."
However, Saint-Georges acknowledged that there is potential opportunity and upside for investors if Biden wins the election in November, noting the likelihood of "pretty sizable infrastructure spending", which "as an investor, could be played on the industrials side".
He added that while growing political consensus means that a Biden Whitehouse would probably still mean "a tough stance on China", it could potentially be good news for Europe to which he would take "a less aggressive" stance.
Saint-Georges explained: "On a relative basis, the election of Biden might be positive news for Europe. There are some positive angles that can be imagined from his election.
"Biden would probably make a meaningful effort on the environment and the US might well go back into the Paris Accord on climate change, so that that would be all positive."