Clinton v Trump: what’s the likely impact on markets?

When we speak to investors both in and outside of the U.S., the presidential election is almost always the number one question on their minds.

Our first caveat is to remind investors that proposal differences pre-election are always bigger than implementation differences post-election; divided government ensures that presidents get only a small portion of what they want. In general, this means that investors tend to put too much weight on election outcomes vis-à-vis portfolio expectations. Guessing whether Mrs. Clinton will be bad for healthcare stocks or Mr. Trump will be good for defense/military stocks is a poor way to build a durable portfolio.

Second, there is still a lot of time left. Due to the Electoral College math and superior fundraising and organization, Mrs. Clinton seems the odds-on favorite to win. But we still have a few weeks left. We’ve got one more debate to go, and with these two candidates, the final weeks offer a higher-than-usual chance for more bombshells (perhaps something in Donald’s tax returns or Hillary’s missing e-mails?).

For sport, we’ll continue to handicap the outcome like everyone else, but if Brexit has taught us one thing, it’s that betting on the conventional wisdom can be dangerous. With too many variables still unknown, including the election winner, the make-up of Congress, or how proposals will morph into policy, long-term market implications are uncertain. To be sure, neither candidate has presented a convincing pro-growth policy that would boost economic activity or the equity markets.

Regardless of the winner, Washington gridlock won’t likely produce major policy changes, although some modest corporate tax reform is possible. While long-run return implications are uncertain, we still believe that Mr. Trump’s newcomer status and lack of policy history would make him the source of more short-term volatility.

David Goodsell Executive Director, Durable Portfolio Research Center Natixis Global Asset Management

In our latest 2016 Global Financial Advisor Survey[1] which was released the last week of September, we asked a series of questions related to the projected impact of the U.S. presidential election on key market issues. Our results show clear trends among those who manage client money and distinct difference of opinions between those in the U.S. and those outside the country.

Here are some of our top findings:

U.S. advisors say neither candidate will be better

U.S. advisors appear to be ambivalent or unconvinced when it comes to who they think could have the most positive impact on five key factors: the stock market, bond market, global economy, global trade, and geopolitical risk.

Democratic presidential candidate Hillary Clinton is leading Republican Donald Trump in opinion polls, though her edge over the billionaire has narrowed. What might the outcome, as well as all of the heated political rhetoric, mean for the global economy and financial markets? Are concerns mounting among investors? Is it time for investors to re-adjust portfolio allocations?

An Equity Manager, Chief Market Strategist, and the Director of the Durable Portfolio Construction Research Center share their insights. Given the choice between Clinton, Trump, either, or neither, 40% of respondents in the U.S. chose “neither” for all factors with the exception of global trade, where 32% believe Clinton will fare better, and geopolitical risk where Clinton received the highest number of responses at 35%.

Globally, advisors say Clinton will be better

Outside the U.S., it appears that financial professionals believe Hillary Clinton would have a more positive impact on all five factors. Clinton’s numbers in each run in the mid-40s and mid-50s, while those believing Trump would result in better outcomes numbered in the mid-teens. Country to country there are some variances in responses. But overall, advisor sentiment was relatively consistent from country to country.

What advisors think about next U.S. President

Stock markets

• U.S. respondents over the age of 47 believe Trump will be better for the market (34%) compared to Clinton (21%) while 37% answered neither.
• 57% of women advisors globally believe Clinton will be better for the stock market.

Bond markets

• 47% of advisors globally give Clinton the edge for bonds compared to 14% who believe Trump will be best. Colombia (65%), Chile (61%), Spain (57%), Italy (55%) and Panama (55%) report the strongest inclination that Clinton will be best for bonds. France is a significant outlier from this trend with 47% of advisors choosing “neither.”

Global economy 


• 43% of U.S. women advisors believe Clinton will be better for the global economy compared to 19% who believe Trump will be better.
• Globally, 44% of advisors favor Clinton on the global economy, 27% say neither, 16% favor Trump and 13% call it a toss-up.

Geopolitical risk

• 2% of U.S. Independent Advisors and 45% of U.S. women advisors believe Clinton will be better on geopolitical risk. For women globally, the number reached 62%.
• 41% of advisors with books of business above average ($29.5 million is sampling’s average size) favor Clinton on geopolitical risk, 29% say neither and 23% say Trump. Those with books below average are more likely to say neither (39%).

Chris Wallis, CFA®
CEO, Portfolio Manager
Vaughan Nelson Investment Management

There is no doubt about it – the U.S. has an interesting pair of presidential candidates this election season. They are offering very different policy choices across the board – from foreign, trade, tax, economic, healthcare to immigration policy. But that being said, I really don’t believe it makes any difference to the markets and long-term investors’ portfolios whether Hillary Clinton or Donald Trump wins on November 8.

180-plus years of irrelevancy

If you look back at U.S. presidential history for over 180 years, you will see that the elected president has never really had a big impact on the financial markets. In the longer run – past the short-term market blip that can occur with an election surprise – the president’s policy choices have been pretty irrelevant to financial market performance. History also shows that the average volatility in the market today is about the same as it was in the early 1800s, the mid-1800s, the late 1800s, the early 1900s, the mid-1900s, the postwar period…and so on. Again, U.S. presidents don’t typically drive financial markets. This is really hard for people to grasp, because they believe these elections every four years are extremely important and have dramatic impact on all aspects of their lives. But, again, when it comes to the markets, history proves otherwise.
Whether it’s Clinton or Trump, I’m reasonably bullish we’re going to get some productive fiscal policy that will stimulate economic growth in the U.S. It doesn’t take much to be productive – you can cut a corporate tax rate, add a little bit of infrastructure spending. At the end of the day, no politician gets reelected unless the economy is growing. Therefore, I believe we’re going to grow the economy.
This election year continues to be quite entertaining and great for the networks and media. We should all record Saturday Night Live between now and November. It’s going to probably be the best shows of all times. But for the markets, I just don’t think it matters. I tell people to ignore it, but it’s going to be really tough to ignore.

By David Lafferty, CFA®
Chief Market Strategist

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[1] Natixis Global Asset Management, Global Survey of Financial Advisors conducted by CoreData Research, July 2016. Survey included 2,550 financial advisors in 15 countries

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