When the dust settles after the presidential election, some pundits will have been right and other will have been wrong.
Such is the nature of politics.
The victors will claim their insights and analyses were just better than everyone else’s, they took into account factors that others overlooked, they saw beyond the headline figures and understood what’s really important to average American voters blah blah blah.
But let’s be honest, a supercomputer would struggle to filter through all the variables and take into account the size and scale of ‘shy Trump voters’ who feel unable to admit they are voting to re-elect him.
Democrats are shouting that Joe Biden will triumph just as much as Republicans are confident Donald Trump will prevail.
Ultimately, the outcome [albeit potentially drawn out over a lengthy court battle] will be what it will be.
Mug’s game
When it comes to investors positioning themselves ahead of the result, Morningstar Investment Management’s Mike Coop describes betting on the election outcome as “a mug’s game”.
The head of multi-asset portfolio management for Emea said: “Not only do you need to forecast the winner, you also need to forecast changes in policies they will be able to turn into law, their economic impact and whether markets are already priced for this outcome.
“It’s expensive to hedge against a big fall in markets around election time.”
He explained that the US stock market is very overvalued and at current prices the odds are stacked against investors, compared to other stock markets.
“But there are pockets of value within the US market; including energy, financial, consumer staples and value stocks,” Coop said.
“Instead of punting on the election, investors can deal with this uncertainty by biasing their portfolio to markets that offer better risk-adjusted returns and using diversification to reduce the risk of a large fall in the value of their portfolios.”
