Three days in, and the US election continues to loom over financial markets as Joe Biden and Donald Trump both expect victory.
The pollsters have had to beat a shame-faced retreat as Biden’s knife-edge lead in votes counted so far made a mockery of their near-unanimous predictions that a ‘blue wave’ would sweep the US political landscape.
A Democratic sweep now seems unlikely, and so does result this week. The Trump campaign is taking the battle to the courts, claiming that “illegal votes” from dead people and non-residents are being counted.
Spectators have watched the dramatic rise and fall of investors’ ‘blue wave’ bets play out across financial markets over the past week. One of the lynchpins of an anticipated Democratic landslide that many in the markets were apparently expecting was an immediate stimulus package to boost asset prices – a plan which may scuppered if the Republican Party ends up holding the Senate.
This has turned the tables on cyclical assets, sending investors flooding back into ever-green government bonds and tech stocks. Yields on 10 year US Treasuries have tumbled thanks to rising prices, and fund managers say yields could go even lower.
Climate change is another key issue that hangs on the outcome of the Presidential race. The US formally pulled out of the Paris Agreement on Wednesday, and if elected, Biden has said he would re-join in the hopes of limiting the rise of global temperatures to under two degrees above pre-industrial levels, in addition to spending USD2 trillion on green infrastructure.
Sustainability has seen a boost in the investment industry, as American investor Fidelity joined European firms Actiam, Aviva Investors, and Robeco in a new campaign to halt commercial deforestation, using satellites to identify companies with deforestation in their supply chains and track their progress.
ESG equity funds are far outstripping the market, garnering GBP542 million in inflows in October, compared to GBP625 million of outflows for non-ESG funds.
Equity funds are as a whole struggling in Europe and the UK, where financial markets are adjusting to a 1.5 million strong surge in cases of Covid-19 in one week, and economically ruinous national lockdowns have become the new normal.
Madeleine Taylor
Editor, Private Equity Wire