How to invest ahead of the US election

With the US election potentially reshaping policies, investors should manage exposure to election-sensitive sectors and currencies, consider structured strategies, and focus on infrastructure and reshoring beneficiaries amid geopolitical uncertainty.

The finely balanced nature of the campaign increases the chance of volatility in the immediate run-up to the vote and its aftermath. The risk of market swings would be especially pronounced if either party gains control of the White House and Congress. We have identified a series of stocks across sectors that would likely be affected by a Trump or a Harris presidential win, and investors can employ capital preservation strategies or yield-generating strategies to help manage the potential volatility associated with the outcome. We also recommend avoiding excessive exposure to potentially heavily impacted sectors and ensuring adequate diversification across sectors and markets.

The election creates a range of risks that makes gold a potentially attractive hedge. Both parties have adopted tough language on trade with China, adding to the potential of an intensification of geopolitical tensions after the election. A risk-off move in equity markets could be possible if a Trump administration follows through on campaign promises for steep tariffs on imports or in the event of fears of higher taxes and regulation. Additionally, the election could contribute to worries over the scale of government borrowing, especially if either party wins a clear sweep. Each of these outcomes, while potentially challenging for equity markets, would be positive for gold prices, in our view. More broadly, the metal should also benefit from a weaker dollar ahead.

Concern over the security and economic risks posed by trade with China is shared by both parties. So, while the manner of intervention may vary depending on the election result, a trend toward protectionism is likely to continue regardless of who wins. Investors should therefore assume greater obstacles to free trade over the medium term. While tariffs and other protectionist measures could pose risks to companies with international supply chains, such as some in the consumer discretionary sector, it could also accelerate investment trends like nearshoring. Sectors that benefit from nearshoring include infrastructure and robotics, as companies build up production facilities in alternative locations.

A Trump victory would hurt sentiment toward the Chinese yuan, and the People’s Bank of China’s promise for aggressive monetary easing measures is a fundamental constraint for CNY appreciation. We recommend investors keep their CNY hedges.