Analysis: Green and easy money investment bets will be election winners

In this news, we discuss the Analysis: Green and easy money investment bets will be election winners.

LONDON / HONG KONG / SINGAPORE (Reuters) – The tight and inconclusive US election has sabotaged some short-term trades based on a clear Joe Biden sweep, though most fund managers say they are sticking to it betting on a bountiful raise and a green boom no matter who wins.

President Donald Trump’s battle against Democratic challenger Biden goes all the way, but with millions of votes yet to be counted, betting odds hover from one to the other as more and more States report results.

From trade to taxation to climate, the two men have very different political platforms. Biden’s promise to tie America’s economic recovery to the fight against climate change runs counter to Trump’s desire to remove regulatory barriers to oil, gas, and coal.

Cradled by the Biden opinion poll, some investors had positioned themselves for higher US bond yields and revolving stocks. Some of those trades were hit – stocks of US solar companies and European wind farms fell, while US Treasuries gained and European stocks .STOXX50E.STOXX underperformed.

Traders have also dumped auto stocks as the specter of Trump’s greater protectionism resurfaces after years of a trade war with China.

“A blue wave would have been very beneficial for the green theme, and everything in this sector could suffer in the short term,” said Didier Borowski, head of global views at Amundi, Europe’s largest fund manager.

“If Trump is re-elected, the main threat to Europe is the start of a trade war, with Germany in particular and new tariffs on the auto sector. This is a major risk on the radar screen. “

However, with a clear election result still potentially in a few days or in court, fund managers are in no rush to shake the portfolios.

Many reasons. First, whoever the next US president is, the global health and economic crisis unleashed by COVID-19 will dominate the investment landscape.

Second, Asian stocks held on to the gains, suggesting that the region’s economic growth would not be derailed even by a Trump victory. And perhaps more importantly, currency is expected to remain cheap and plentiful in the United States and elsewhere, which underpins the long-term outlook for stock markets.

A US stimulus package is seen as inevitable as politicians of all stripes try to spur an economic recovery hit by a resurgence of COVID-19.

While a Biden victory could result in more spending – as well as higher yields on government debt to pay them off – the prospect of a delayed outcome has not sparked panic, although U.S. Treasury bonds did. are straightened out.

“Where we have an anchor is that we know that monetary policy will stay very simple and could get even easier,” said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International.

A shift towards more environmentally friendly investments is also here to stay, most believe.

“Greening the global economy will be something that happens whoever is responsible, green energy is cheaper than fossil fuel energy,” said Rupert Watson, Head of Asset Allocation at Mercer Investments.

“Politicians can kick it in the right direction, but it will happen anyway.”


In Asia, this meant continued bets on the Chinese recovery.

While the CNH = yuan sold off strongly as Trump’s odds appeared to be improving, most did not expect the turmoil to last.

“Chinese stocks and bonds are likely to continue to attract interest from foreign investors… Chinese consumers and exports, the two pillars of China’s economic growth engine, are intact,” said Lei Wang, portfolio manager at Thornburg Investment Management in New Mexico.

Indeed, that put a solid foundation under corporate earnings and pushed China’s blue-chip index .CSI300 up about 16% this year, compared to a drop of 1.4% for global equities. MIWO00000PUS more generally – what investors think needs to be done.

“We’re not trying to negotiate the election, it’s too difficult,” said Vikas Pershad, a Singapore-based fund manager at M&G Investments.

“The US share of (global) GDP has fallen very steadily (during my lifetime). Where did he go? He came to Asia. I don’t think that will change.

Reporting by Tommy Wilkes in London, Scott Murdoch in Hong Kong and Tom Westbrook in Singapore; Additional reports by Abhinav Ramnarayan, Carolyn Cohn and Danilo Masoni; Editing by Sujata Rao and Angus MacSwan

Original © Thomson Reuters

Originally posted 2020-11-04 22:16:12.

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