There are just 87 days to go until the US election, and seldom have Americans cast their votes in such extraordinary circumstances.
The economy is cratered, but stock markets are reaching for the skies and the victor may be the man who seemed, just a few months ago, to have little chance of occupying the Oval Office. Joe Biden, the Democratic candidate, has taken a strong polling lead over President Trump.
The situation represents a considerable dilemma for UK investors who have backed the American dream and are now wondering whether to bow out, or stick around for more thrills and spills (both are likely).
There are just 87 days to go until the US election, and seldom have Americans cast their votes in such extraordinary circumstances
America’s GDP fell by an annualised rate of 32.9 per cent in the second quarter, the steepest decline on record, and the pandemic is forecast to cost the US $8 trillion in lost growth over the next decade.
A rescue package is being delayed by rows between the Trump administration, the Republican-controlled Senate and Democrat leaders in Congress.
Meanwhile, the markets’ mood is remarkably sunny, with the Nasdaq index close to 60pc above its March lows, driven by Apple, Alphabet (Google’s parent company), Amazon, Facebook, Microsoft and Netflix.
Their ascent has been accelerated by lockdown demand for online shopping and streamed entertainment.
Microsoft is set to acquire parts of Chinese-owned Tik Tok, the song-and-dance app, a move that exemplifies Big Tech’s insatiable appetite for more users (and their data).
One aim of Trump’s threat to ban US companies’ dealings with TikTok is to facilitate this purchase. The Dow Jones Industrial Average and the S&P 500 index – which include fewer tech companies – are about 43 per cent higher.
Such has been the soaraway performance of markets that some consider a sudden fall to be inevitable, although a lack of return from other investments is a key factor behind the rising share prices.
Morgan Stanley is among those warning of a possible 10 per cent stock market correction, but the bank expects this to be followed by ‘a surprising recovery in the economy and earnings later this year and into 2021’.
Others argue that the outlook is less easy to discern. Ian Heslop, co-manager of the Merian North American Equity fund, says: ‘You could follow the old rule of thumb that a Republican victory tends to be good for the markets and a Democratic victory not so good. But things are now more nuanced.’
But reflecting on a Biden presidency’s impact is still worthwhile. He may be minded to be less aggressive in dealings with China than Trump, although the effects of the current president’s stance may be hard to unravel.
Since the 77-year-old Biden may only serve one term, his running mate choice, due to be announced this month is key.
Heslop comments: ‘Will she – and it will be a she – be a Left-winger or someone who can secure the centrist vote?’
A more socialist vice-president may push for the breaking-up of Amazon and Facebook to curb their power and the reversing of tax cuts for corporations and individuals.
This would hit share prices, although any dip could be regarded as a buying opportunity.
It is also interesting to pinpoint shares that could be boosted by Biden’s clean energy policies.
Procter & Gamble, with its ambition to become carbon neutral, may be one beneficiary.
This consumer goods bellwether has prospered during lockdown, as people have turned to Ariel and its other trusted brands. It’s a trend that has also favoured Kellogg’s, the cereal maker, but, confusingly, Kraft Heinz has stumbled.
The difficulty of assessing what lies ahead for companies and the economy may incline some investors to cash in their US gains.
Yet even if you believe that tech share prices have lost touch with reality, it is clear lockdown has speeded the adoption of technology.
Ben Yearsley of Shore Financial Planning says: ‘Ask yourself if you think that in ten years time we’ll be using more tech than we do today.
‘If the answer is yes, then you need some tech in your portfolio and the companies that lead the field are in the US and China.’
If you choose to stay on board, you could even increase your exposure to technology via the Polar Technology investment trust.
Or you could diversify into fast-developing US biotech via Biotech Growth, another investment trust.
If you have decided to take a bet on America, under either Trump or Biden, Interactive Investor’s best buy funds include Merian North American Equity which holds Microsoft, Procter & Gamble and Johnson & Johnson.
LF Miton US Opportunities is a more adventurous pick. It has a stake in soft-drinks maker Keurig Dr Pepper whose products will appeal to both Trump and Biden for they have something in common: neither likes alcohol.
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