.Tells Nigerian investors to prepare for likely impact
CHIGOZIE AMADI
A report has outlined the projected impact the 2024 US presidential election will have on the global economy, including the Nigerian business landscape. With the momentum building for the presidential election due in November, analysts are keeping an eye on likely outcomes and their attendant effects on the international business environment. Based on reactions to the recent debate and last weekend’s assassination attempt on Trump, the stakes are even higher in the election once more pitching Democratic candidate, Preside Joe Biden against his Republican rival and former President Donald Trump.
Written by Steve Brice, Global Chief Investment Officer at Standard Chartered Bank’s Wealth Solutions unit, the report expects a tight contest based on recent polls while dwelling on the impact fiscal policies would have on the global trade terrain, of which the Nigerian business climate is a part based on foreign exchange rates and the economy’s dollar-dependent nature.
“The question for us, though, is to what extent should investors care. Let’s break this question down into two parts: before and after the election. If we look at history, the second half of an election year is normally still positive for the US stock market, despite the risk of increasing volatility just before the election. This suggests that significant political uncertainty is not normally the dominant driver for investors.
“Hence, we remain overweight global equities and, indeed, have a preference for US equities. We see inflation moderating in the second half of the year, with upside inflation surprises already starting to fade. This should allow the Fed to start cutting interest rates in the second half of the year and bond yields to decline,” Brice wrote, praising the US stock market’s resilience due to its technology and communication service outlook.
According to the Standard Chartered Bank chief, the indices are projected to become more complicated after the election, affecting earnings from equities which have recovered strongly in recent weeks and currently outperforming expectations. His three main scenarios are captured thus: a clear Biden victory, a narrow Biden victory and a Republican clean sweep, noting that the first outcome would mean fiscal policy will likely remain tilted towards high spending and raising taxes on the wealthier segments of society and continued sponsorship of the decarbonisation agenda. The second scenario would mean dramatic policy changes are unlikely while a clean sweep for the Republicans would minimise political uncertainty but could see radical shifts in economic, trade, immigration and geopolitical policies.
“Making predictions based on political outcomes is always risky. Remember 2016 when the overwhelming narrative was that a Trump win would be bad for equities. On confirmation of his victory, the stock market dipped intra-day, but then rose over 30% in the next 14 months,” Brice continued.
“It is important for investors not to overreact based on personal political biases or rhetoric. Elections, especially emotionally-charged ones, make investment decisions more challenging. However, I believe the best approach is to stay invested through the uncertainty and look for opportunities to add to diversified portfolios if we see short term weakness,” he concluded.
