Focus on the presidential election

Although many leading stock exchanges improved greatly in the last part of September, most fell during the month as a whole. Now, everyone's focus is on the US presidential election.

For the month, the US S&P 500 Index fell by 3.8 per cent measured in USD, while the European Stoxx 600 Index dropped by 1.4 per cent measured in EUR and the Oslo Stock Exchange All-Share Index sank by 0.4 per cent measured in NOK.

Biden is the favourite, but …

The US presidential election is rapidly approaching. Following a period in which Biden was clearly in the lead, Trump has now closed the gap. Biden is still the favourite, but the past few years have shown that the final result is not always what was expected. From a market viewpoint, there is also uncertainty about fiscal policy, infrastructure investments and the trade war. As regards the latter, the fears of a forced transfer of power if Trump loses the election, election chaos or the postponement of a new stimulus package are what are causing unpredictability. In addition, the fact that Trump himself now has COVID-19 naturally creates uncertainty as the election campaign comes to an end.

More tax for companies?

Companies are expected to have to pay more tax if Biden wins. It is also more uncertain how a change of power will affect households' taxes, the budget deficit and economic growth. The size of the budget deficit is important for analysing growth impulses in both the long and short term. At the same time, the scale of the COVID-19 rescue packages are helping to reduce the differences between the Democrats' and Republicans' policies. The differences relating to infrastructure investments are also slight, although most people believe these investments will be bigger under Biden. What is more important from a market viewpoint is perhaps the relationship with China and reduction in the trade war, and there are expected to be fewer confrontations if Biden is president.

Sound growth in the economies

Following a sharp fall in global GDP growth in the second quarter, growth is expected to make a sound comeback in the third quarter, after which a considerably lower growth rate is envisaged. However, the consensus is still continued growth above trend, so that for example unemployment will continue to fall. Otherwise, the time frame for developing and rolling out a vaccine will also affect the forecasts.

The road ahead …

Following the turbulence on the stock exchanges in the first part of September, investors once again seem to be pressing the gas pedal. The US presidential election may affect investor sentiment. At the same time, interest rates are either close to zero or negative, and this is also beneficial for shares.

"The poll that matters is the one that happens on Election Day"
Heather Wilson