As the US gears up for the presidential election on November 5, 2024, with Kamala Harris and Donald Trump as the leading candidates, Zimbabwean investors are rightfully pondering how to safeguard and potentially grow their investments amidst the political uncertainty. Here’s a comprehensive guide:
Historical context and election impact
Historically, the US stock market has shown a positive bias in election years, although specific outcomes can significantly sway sector performances. For instance, Democratic presidencies have traditionally been associated with stronger job growth and higher GDP, but also with periods of increased market regulation and higher taxes which might affect sectors like technology and finance. Conversely, Republican administrations might see deregulation, tax cuts, but often with mixed economic outcomes, especially in the short term.
Election scenarios and market implications:
Kamala Harris victory:
- i) Policy implications: Likely continuation or enhancement of social programs, environmental policies, and potentially higher corporate taxes.
- ii) Market strategy: Focus on sectors like green energy, technology, and healthcare which might see government support or investments. Defensive sectors like consumer staples could also be less affected by economic policy shifts.
Donald Trump victory:
1) Policy implications: Expected deregulation, tax cuts, possibly favoring energy, manufacturing, and financial sectors.
2) Market strategy: Engage with traditional energy sectors like oil, and sectors benefiting from infrastructure spending or deregulation.
3) General strategies for capital protection:
Diversification: Spread investments across different sectors, asset classes, and consider international diversification to hedge against US-specific risks.
Index funds: Investing in broad market indices like the S&P 500 reduces exposure to individual sector downturns.
Defensive stocks: Sectors like utilities, healthcare, and consumer staples tend to perform regardless of broader market conditions.
Currency risk management: Given Zimbabwe’s currency challenges, consider investments that appreciate with a weaker USD or use currency hedging strategies.
Options and volatility trading: Options can act as insurance against market downturns. Alternatively, trading volatility ETFs could benefit from expected election-induced volatility.
4) Growth opportunities:
Sector rotation: Anticipate shifts in policy to rotate capital into sectors poised for growth post-election.
Long-term perspective: Historically, markets recover post-election. Maintaining long-term investments might mitigate short-term election volatility.
Policy monitoring: After the election, closely watch for new policy announcements. Early investments in sectors aligned with these policies could yield returns.
5) Historical analysis and election predictions:
While not foolproof, market performance can sometimes hint at election outcomes. Historically, when the market performs positively in the three months before an election, the incumbent or their party tends to win. However, this year’s tight race and unique political climate add layers of complexity:
Market sentiment: The current market’s performance, as of late October 2024, shows a slight edge towards sectors typically favored under a Republican administration, suggesting market participants might lean towards a Trump win. Yet, this is a nuanced indicator.
Disclaimer: Predicting elections via market returns is inherently uncertain due to numerous variables like voter turnout, policy impacts, and unexpected events.
In summary, for Zimbabwean investors, while the 2024 election introduces uncertainty, it also offers strategic opportunities.
By understanding potential policy impacts, maintaining a diversified portfolio, and being prepared to adapt post-election, investors can navigate these waters effectively.
Remember, while elections introduce volatility, they also present unique moments for strategic investment.
Always keep an eye on the broader economic indicators and global trends, not just US politics, to make investment decisions. If you want a detailed investing strategies analysis, feel free to conduct me via the undersigned details on a paid consultation basis. Till next time, trade and invest wisely and may the market be on your side!
*Isaac Jonas is a Canadian- based economist and consultant at Streetwise Economics. He is also a retail investor and retail trader, focusing mainly on the US and Canadian capital markets. He regularly shares insights via his social media handles and YouTube channel (Streetwise Economics). His website is www.streetwiseeconomics.com and can be reachable on isacjonasi@gmail.com. Insights shared in this article do not amount to investment advice.