Avoid 'knee jerk' response to US election

Avoid 'knee jerk' response to US election

Investors should be wary not to repeat the mistakes made immediately after the Brexit vote in the aftermath of next week's US presidential election, according to AMP Capital.


Commenting on the upcoming election, AMP Capital chief economist Shane Oliver said there was "a danger" in making to big a deal out of the election result, citing the bear rally on stocks following the UK's shock decision to leave the European Union.

"Around the Brexit vote there was much concern a 'Yes' vote would be a disaster for shares and the global economy," he said.

"In the event there was an initial knee jerk sell off but after a few days global markets moved on to focus on other things."

Mr Oliver suggested there were three possible outcomes for the US election, the most likely also being the most favourable. 

"The best outcome for shares would be a Clinton victory but with Republicans retaining control of at least the House, this would be seen as 'more of the same'," he said

This is an outcome Mr Oliver said has a 50 per cent likelihood of occurring. The alternative outcomes are a Trump presidency in which the republicans maintain the House of Representatives and the Senate, which Mr Oliver attached a 45 per cent likelihood too, and a 5 per cent chance of a Clinton presidency in which the democrats takes a majority in the House and Senate.

Eaton Vance chief equity investment officer Edward Perkin also listed these three possible outcomes for the election, though Mr Perkin said a Trump presidency was "the least likely at this point".

Nonetheless Mr Perkin said investors should consider the ramifications of all three possibilities, saying, "These are three different scenarios, with very different potential implications. For investors, it's important to not just assume the base case, but to consider the alternative scenarios and associated risks as well."

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Avoid 'knee jerk' response to US election
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