Register to get unlimited access to all of Citywire’s fund manager database. Registration is free and only takes a minute.

Money managers react to US midterm election

Tuesday’s US midterm elections shifted US Congress to split control. Money managers discuss how this changes the outlook for the US economy

Ed Perks, Franklin Templeton
Chief Investment Officer (CIO), multi-asset solutions

In our view, a divided Congress is not likely to have a material impact on our economic outlook. We continue to expect positive global economic growth led by a US economy.

Although it’s possible that US growth could slow as the boost from fiscal expansion fades, we think the effects will be minor because markets have largely priced in this outcome.

In general, we think a divided Congress will likely leave the overall direction of policy unchanged.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Ed Perks, Franklin Templeton
Chief Investment Officer (CIO), multi-asset solutions

In our view, a divided Congress is not likely to have a material impact on our economic outlook. We continue to expect positive global economic growth led by a US economy.

Although it’s possible that US growth could slow as the boost from fiscal expansion fades, we think the effects will be minor because markets have largely priced in this outcome.

In general, we think a divided Congress will likely leave the overall direction of policy unchanged.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Hou Wey Fook, DBS
CIO

The midterm election result is, on balance, positive for financial markets.

The S&P 500 Index rallied 2.12% overnight, while the US high yield bond spread also tightened by nine basis points.

While heightened gridlock will weigh on fiscal initiatives, it will also slow down the rise of the dollar and rates. This is positive for risk assets.

The latest rebound in sentiment also presents an opportunity for investors to re-engage risk assets.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Ronald Chan, Manulife Asset Management
CIO, equities, Asia ex-Japan

We believe that the US economy, while currently strong, will begin to marginally decelerate along with global economic growth heading into 2019. The dollar will start to gradually turn over as a result.

This development should be a positive for emerging markets and particularly emerging Asia where a stronger US dollar has hurt equity returns year-to-date.

The mid-term election results should also have a moderating impact on the US-China trade relationship.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Frank Thormann, Schroders
Portfolio manager

Two important implications from this election will be stronger presidential oversight and increased political gridlock.

Democrats now have a much larger ability to put a check on the president’s power. Future policy will require much greater bipartisan support as both houses are required to pass legislation.

One immediate impact of this is a lower likelihood of further fiscal stimulus, which is slightly weighing on the US dollar Thursday morning.
 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Randeep Somel, M&G Investments
Director of global equities

Equity markets historically have done well with a split House and Presidential party – I think the results will be good for equity markets in general.

Democrats will look to the defence department for savings and block any further loosening of environmental regulation.

Meanwhile, Donald Trump will also be able to apportion blame to Democrats between now and 2020 if things go wrong – as they are now a part of the government. The midterm results make a Trump re-election in 2020 more likely.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Mark Sherlock, Hermes Investment Management
Head of US equities

The market is likely to take the result as a mild positive.

A split Congress limits the government’s power to interfere as well as allows for additional checks and balances over President Trump and his policies.

From a market point of view, the Republican success in the senate should reassure investors that there has been no significant ‘lurch to the left’ by the US electorate.

As such, the current administration’s pro-business policies will remain in force, providing ongoing support for the domestic economy.
 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Citywire A-rated Ian Heslop, Merian Global Investors
Head of global equities

President Trump’s plans for further tax cuts are likely to be shelved, but a greater Democratic voice on Capitol Hill increases the chance of gridlock can often be a good outcome for equity markets.

However, foreign policy remains the one notable area in which this result does not really hamper Trump’s powers.

A well-hedged stance remains appropriate amid an uncertain investment backdrop.

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

David Giroux, T. Rowe Price
Head of investment strategy

The 2018 midterm election is not likely to become a market-moving event.

There will probably be gridlock until 2020, so I would not expect to see any major legislation passed over the next couple of years.

While the election outcome is not likely to have a major impact on market performance, the new Congress will probably consider controversial issues that could stir market volatility.

One example is efforts to place limits on drug prices or another attempt by Republicans to replace the Affordable Care Act, which could impact drug or health care provider stocks, respectively.

 

 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Jim Lydotes, BNY Mellon Investment Management
Senior portfolio manager

The US government functions most effectively when there is a balance of power and there will likely need to be compromise on big issues.

We are not pegging our story to a huge revival of US infrastructure but with a better balance of power we could emerge with a legitimate infrastructure investment plan.

A stable infrastructure plan can be a good way of invigorating the domestic economy.  

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Citywire A-rated Olivier Marciot, Unigestion
Investment manager

On the back of the election results, US and European equity futures are up about 1%.

In our estimation, this reflects a market refocus on fundamentals that remain positive for equities, especially in the US, and will not meaningfully change with a Democratic House.

Rather, we expect political gridlock for the next couple of years, which will likely keep any additional significant fiscal spending at bay.

 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Paras Anand, Fidelity International
Head of asset management, Asia Pacific

Infrastructure spend was high on the Democrat policy agenda if we go back to the 2016 Clinton election campaign.

The Democrat view on the budget deficit may change from opposition to tax cuts, for instance, to accommodation, such as spending on roads, hospitals, airports.  

Any development in this direction would further spur the overall economy, continue to push wages in an already tight labour market and potentially challenge the current expectations around Fed activity for next year.

 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Elliot Hentov, State Street Global Advisors
Head of policy and research

Initial market reaction has been positive as the outcome fulfilled expectations.

A divided congress should lead to fewer policy surprises and greater focus on macroeconomic fundamentals, which should be positive for markets.

Since 1946, the S&P 500 has delivered positive returns in every 12-month period following a midterm election. The fourth quarter of a midterm year typically generates the highest return of that year.

Given the October drawdown and a stable election outcome, we think there is a strong likelihood of markets adhering to a similar pattern.

 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Related Fund Managers

David Giroux
David Giroux
7/161 in Mixed Assets - Aggressive USD (Performance over 3 years) Average Total Return: 27.39%
Randeep Somel
Randeep Somel
489/1437 in Equity - Global (Performance over 3 years) Average Total Return: 19.75%
Ian Heslop
Ian Heslop
178/1437 in Equity - Global (Performance over 3 years) Average Total Return: 26.62%
Olivier Marciot
Olivier Marciot
185/439 in Bonds - Global (Performance over 3 years) Average Total Return: 4.13%
Mark Sherlock
Mark Sherlock
479/772 in Equity - US Small & Medium Companies (Performance over 3 years) Average Total Return: 26.72%
Ronald Chan
Ronald Chan
117/231 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: 14.42%