Vincent Ropers, co-manager of the Wise Multi-Asset Growth fund
In the shadow of the pandemic, President Trump's poll numbers are flagging. The market is now waking up to the possibility of a Joe Biden win.
A Biden-led mandate would have three major impacts. The first is a rollback of most of Trump’s signature corporate tax cuts, which Biden has pledged.
Furthermore, if Democrats retake the Senate, we may see a sudden pivot from polices that have supported stock prices in recent years, such as deregulation.
On the other hand, Biden's plan for a $2trn Green New Deal would have significant implications for the economy and the country's infrastructure.
Whatever reservations people may have about Trump, his instinct that the market is a key metric for presidential success has been a fillip for asset prices.
Now after months worrying about the pandemic, Wall Street is beginning to worry about a Biden outcome.
It seems clear there will be some losers. Materially, a Biden mandate may lift the corporate statutory tax rate to 28% from 21% currently, which would hit the bottom lines of companies – and likely their stock prices.
Health stocks may feel the impact of price control measures.
Meanwhile, tech stocks will feel the brunt of a tax grab, as Democrats are likely to pursue more anti-trust cases against market titans, such as Amazon. A more positive impact is likely to be felt in the infrastructure and energy sectors if Biden is able to follow-through with his Green New Deal unveiled recently.
Finally, one should not underestimate the comfort investors might find in a government outlining clearly-thought plans and acting decidedly, however how market-unfriendly those measures might be.
After all, uncertainty is one of the market's worst enemies and it has struggled at times with Trump's impulsive governing-by-tweet style.
Investors need to weigh up the short-term and long-term impact of a Biden candidacy. Ensuring a portfolio has the right amount of diversification and protection measures can mitigate any short-term volatility if the markets do not react well to a changing of the guard.