CRITERION: Relax! The US election outcome is out of our hands

Australian investors should be alert but not alarmed as they wait for the outcome of the November 5 poll
A US analyst says the Dow’s record levels points to a Kamala Harris victory, but the bookies disagree
The key tangible risk for Australian investors is the prospect of a Chinese slowdown and re-erected tariff barriers.

With 18 sleeps until the outcome of the US election, many investors will be tossing and turning at the prospect of an unpredictable Trump Mark Two presidency, or an indefinitive outcome resulting in political stasis or – worse – civil unrest.

They should also remember the maxim on grandma’s wall: “Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”

Despite unhelpful local polling as to whom Australians hypothetically would elect – the answer is overwhelmingly Kamala Harris – the US electoral process is well out of our hands and impossible to predict.

Mind you, there’s plenty of tea leaf-reading going on.

Investment research group Leuthold claims that when the Dow Jones index has been positive in the eleven weeks leading up to the poll, the incumbent party has won on 22 of the past 24 occasions.

The last exception was in 1968 when Richard Nixon defeated Democrat rival Hubert Humphrey, but there were a few other things going on in Vietnam at the time.

Since August 26 the Dow Jones so far rallied 4.5%, which makes Harris a shoo-in. But bookmakers disagree, having installed the Orange Haired One as the $1.60 favourite versus Harris on $2.30.

While the commentary has centred on the presidential individuals, control of the Senate and House of Representatives also hangs in the balance, the likely scenario being that no party has definitive control.

A disaster? Nah.

“A divided government is often welcomed by investors because it mostly diminishes uncertainty, as sweeping legislative changes become less likely,” says Franklin Templeton Institute’s chief market strategist Stephen Dover.

“This stability allows businesses and investors to operate without major concerns over fiscal or regulatory upheavals.”

We get it! Politicians are most useful when they can’t do anything.

If Harris wins, presumably it’s a case of the status quo – a.k.a stumbling along in the hope that no-one notices the $US35 trillion of public debt – prevailing.

A Trump victory offers relief to the cats and ducks of Springfield, but raises concerns about the inflation-inducing impact of policies such as ejecting cheap illegal immigrant pool boys (which surely won’t go down too well with his Republican base at the Mar-A-Lago Club).

The health of the US and this the global economy aside, the burning issue for Australian investors is his clear intention of erecting tariff walls and the impact on the Chinese – and, more directly, our – economy.

We have already had a taste of this one, with the Chinese imposing punitive imposts on our items such as wine and lobsters (but thankfully not iron ore). This was not directly related to Trump’s tariff actions in his first term, but our own poor relations with Beijing.

On the positive side, share registry Computershare (ASX:CPU) benefits from higher interest rates on its funds held on behalf of customers, notably in the US. Pallet maker Brambles (ASX:BXB) derives about half of its revenue and more than half of underlying earnings from the US, so could benefit from any MAMGA (Make American Manufacturing Great Again) push.

A Chinese slowdown – Trump-induced or otherwise – bodes poorly for BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) although the iron or price has an Houdini-like ability to escape from tight spots.

Gold stocks also may suffer if Trump’s platform of deregulation and tax cuts prevail, the idea being that they could spur economic growth and create inflationary conditions not amenable to the yellow metal.

Plato investment Management’s top ten list of the most vulnerable ‘Trump’ stocks globally includes two ASX listed gold plays: De Grey Mining (ASX:DEG) and St Barbara (ASX:SBM).

It also includes lithium miner and iron ore processor Mineral Resources (ASX:MIN) – presumably because Trump is expected to be hostile towards renewables.

Portfolio tweaks aside, all investors can do is strap themselves in and enjoy the ride.

It’s worth remembering that Trump’s surprise 2016 victory was expected to be disastrous for markets – but the Dow rallied 7% between the election and when The Donald collected the keys to White House on January 20 2017.

The rally didn’t stop there, either.

This column does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision