Stock Market News: Investors Worry More About US Election Than Trade

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Investors have grown more concerned over the threats posed by this year’s US presidential election than the global trade war, underscoring the importance of America’s public policy as markets sit at record highs.

A survey of fund managers by Bank of America, released on Tuesday, showed that concerns over global trade had fallen to second place on investors’ lists of events that could unsettle markets. Trade fears had dominated every month since mid-2018, barring one in which concerns of a China slowdown took hold among about 200 asset managers with $630bn in funds under management.

The sharpening focus on the US election comes as campaigning is entering a crucial phase, with polling day now less than 10 months away. Impeachment proceedings, triggered by Democrats in the House of Representatives, are also set to begin later on Tuesday in the Senate.

“While there are no obvious signs of election-related effects on economic activity so far in this election cycle, there is some concern that . . . uncertainty could have a more noticeable effect on sentiment and activity as the election approaches,” said Jan Hatzius, chief US economist at Goldman Sachs, earlier this month.

“Increased uncertainty weighs on growth, suggesting that the upcoming election might pose modest downside risks for growth and investment,” said Mr Hatzius, in a note sent to the bank’s clients.

Uncertainty typically rises between January and March — the key nomination period — and then again as election approaches in September and October, Mr Hatzius noted.

BlackRock, the world’s biggest money manager, late last year reduced its rating on US equities to “neutral”, having previously suggested investors overweight the asset class in their portfolios, saying that a “wide range of potential policy outcomes may weigh on sentiment”.

US stocks have rallied to record highs during 2020, having soared by almost 30 per cent in 2019. Strength in the US economy and an easing in concerns over global trade led by an improvement in relations between Washington and Beijing have played a key role in Wall Street’s performance.

However, the election outcome could prompt significant policy changes, with ramifications for the economy and the markets.

“US politics will be the main source of volatility as we head toward the 2020 US presidential election in November,” said Sonal Desai, chief investment officer for fixed income at Franklin Templeton, a fund manager.

“Some of the leading Democratic contenders have policy platforms that echo the Obama presidency, while others have put forward proposals that would fundamentally alter the business environment with a likely severe negative impact on growth and markets,” Ms Desai said.

She noted, however, that, “a second term for Donald Trump would most likely involve a continuation of the policy-by-tweet pattern that has already proved disruptive in terms of market volatility and business investment uncertainty”.


Today’s Stock Market News – Tuesday, 21 January, 2020 ♦


Moody’s has cut Hong Kong’s credit rating, saying the government’s “slow” and ineffective response to months of protests has prompted it to reassess the Chinese territory’s institutional strengths and governance.

Hong Kong’s rating was reduced by one notch to Aa3 from Aa2, making Moody’s the second major agency to cut its rating since protests began last summer.



“The underlying drivers of the protests are certainly deep-seated and intractable,” Moody’s said. “Nevertheless, the response by Hong Kong’s government to both political demands by parts of the population and broader concerns about living standards in [Hong Kong], housing costs and equality of economic opportunities has been notably slow, tentative and inconclusive.”

The territory’s economy has come under strain — and its place as one of Asia’s pre-eminent financial hubs called into question — as chief executive Carrie Lam’s government has struggled to contain months of violent clashes between policy and protesters.

HSBC, the territory’s biggest lender, was forced this month to close branches after it was accused of helping police close an account used to raise funds for demonstrators.

Moody’s warned in its report issued late on Monday Hong Kong time that the lack of an effective response points to more “significant constraints on the autonomy of Hong Kong’s institutions than previously thought, notwithstanding the ‘one country, two systems” policy which has underpinned autonomy for the last two decades”.

When Fitch cut Hong Kong’s rating in September, it expressed concerns over the extent of Beijing’s control over the territory.

“Months of persistent conflict and violence are testing the perimeters and pliability of the ‘one country, two systems’ framework that governs Hong Kong’s relationship with the mainland, underscored by mainland officials taking a more public stance on Hong Kong affairs than at any time since the 1997 handover,” the report said.

The ‘one country, two systems’ relationship between Hong Kong and China is a crucial element that has for more than two decades drawn businesses to Hong Kong. The territory provides foreign groups with access to China and the region more generally, but with a legal system and other protections that analysts say are more closely aligned to international norms than on mainland China.

Moody’s said that signs that the relationship is fraying raise “the risk that actions by foreign governments negatively impact its competitiveness and economic strength and hinder the effectiveness of policymaking still further”. It pointed specifically to a US law passed last year that could lead to the revocation of trade and other commercial privileges Washington extends to Hong Kong.



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2 thoughts on “Stock Market News: Investors Worry More About US Election Than Trade

  1. Pingback: Investors Worry More About US Election Than Trade -

  2. Pingback: Investors Worry More About US Election Than Trade … via /r/economy | Chet Wang

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