Politics & Stockmarkets: Red House, Blue House, White House
As I am sure you’ve all been watching, we’ve recently seen the end (for now) of one of the most drawn out and painful voting processes in recent times.
Yes, Frazer and Pete won Elly and Becky Miles' hearts on The Bachelorette.
But in international news, baring many legal challenges, we will see Joe Biden taking up residence in 1600 Pennsylvania Avenue, Washington in January.
In most meetings I have had this week, people have asked about the impact of this on portfolios especially seeing a little jump in US and Aus stocks this week.
Markets in most countries like stability, so many times we have seen a small rally in stocks after a campaign is over, regardless of the outcome. Biden was long predicted to win this one (albeit more handsomely as he ultimately did) so there is no great shock here. And with the country roughly split Republican and Democrat, any new president knows he must sit somewhere in the middle of left and right.
I’ve taken the below from an article by Dimensional Fund Managers to show the bigger picture.
Regardless of political party, the stock market marches on. In fact, the small rallies this week are more likely to come from the successful results in vaccination production giving renewed optimism to a global reopening in 2021.
Whatever your feelings on America, there will be a reasonable amount of your portfolios directed there – the total market value of Apple, for example is US$2 trillion.
The total value of all 300 companies on Australia’s ASX 300? US$1.3 trillion.
Hence our portfolios should always be globally focused unlike some investors who hold only Australian stocks because of the franking credits.
More negative writers suggest the US market is higher risk due to its bigger players: Facebook, Apple, Google, Netflix & Amazon being new Technology firms.
But it’s worth remembering that every company would have been classed as new technology at some point in the past – cars, railroads, electricity companies were all technology companies once upon a time!