After America First, some investors bet on a Biden boost abroad

After America First, some investors bet on a Biden boost abroad

With several opinion polls pointing to a Joe Biden presidency, these investors are leaning towards assets such as emerging markets or European bank stocks, as potential beneficiaries of a Democrat win while turning cautious on markets such as Russia which might be hurt by the change. A stimulus-fuelled U.S. growth pickup, accompanied by corporate tax

With several opinion polls pointing to a Joe Biden presidency, these investors are leaning towards assets such as emerging markets or European bank stocks, as potential beneficiaries of a Democrat win while turning cautious on markets such as Russia which might be hurt by the change.

A stimulus-fuelled U.S. growth pickup, accompanied by corporate tax hikes — both expected under Biden — could push capital out of the S&P 500 into other markets, especially if a coronavirus vaccine becomes available early next year.

A consensus for a weaker dollar, driven by more predictable trade and foreign policies under Biden, will add to the big positive for emerging markets.

Valentijn van Nieuwenhuijzen, chief investment officer at asset manager NN IP, said the ties between U.S. and China were key for markets.

“Biden will not be increasing (tensions) further but also not be pulling back aggressively – I do expect the relationship to stabilise rather than escalate, and that will be a benefit for the market and that will give some further room for the rest of the world.”

Many investors said they favoured European cyclicals – companies which do well in a buoyant economy and stand to gain when a spending boost lifts bond yields.

Cyclicals – oil companies, autos and banks – typically outperform “growth” stocks when bond yields rise. U.S. markets are dominated by growth stocks, notably tech.

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