United States
Quick Thoughts: Market Volatility, Sectors, and Election-Stimulated Opportunities
Head of Equities Stephen Dover and Franklin Equity Group’s Grant Bowers discuss potential US equity market impacts from the US elections.
Ahead of November’s US elections, our Head of Equities Stephen Dover and Franklin Equity Group’s Grant Bowers break down potential US equity market impacts. They also give their take on a potential “blue wave,” and share four areas of bipartisan support with nuanced differences, they believe US voters and investors are likely to focus on.
Market phases and elections are somewhat predictable cycles—headwinds, tailwinds, and uncertainty in the outcome are parts of both processes. While elections occur like clockwork (in the United States), both cycles can affect each other in unpredictable ways. I recently had a wide-ranging discussion with Franklin Equity Group Portfolio Manager Grant Bowers that covered potential market impacts from the election, the prospects for infrastructure spending, and how long-term investors might navigate volatility:
- It was overall, a very strong economy until the pandemic began. COVID-19’s effects and its rates of infection, disease, and mortality have also created uncertainty globally across markets.
- We believe a split Democratic and Republican-led government would actually be quite good for markets. The prospects of a “blue wave1,” we believe for investors, would be concerning as we could see a very dramatic shift in government posture and policies toward markets, businesses, as well as towards regulations.
- Both Democrats and Republicans agree on: infrastructure spending, China trade and intellectual property issues, and bringing supply chains back for domestic production. However, we believe there are nuanced differences, including what “infrastructure” is, and how technology and 5G may be part of voters’ and investors’ considerations.
- Technology has become a fundamental part of infrastructure, and how the United States and other countries project power, we believe, and technology companies are a big part of that global power structure.
As an investor, the most important cycle to watch for is your own life and its cycles, and we believe in understanding your investment horizon and thinking longer term. Elections and market cycles come and go; however, they may offer opportunities to purchase stocks at discounted prices relative to their intrinsic worth. For more, watch my “Quick Talks: Sectors and the US Elections” with Grant Bowers here:
ENDNOTES
Source: The Washington Post. “Was it a blue wave or not? That depends on how you define a wave,” November 13, 2018.
What Are the Risks?
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The technology industry can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants as well as general economic conditions. Investments in fast-growing industries, including the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. Investments in infrastructure-related securities involve special risks, such as high interest costs, high leverage and increased susceptibility to adverse economic or regulatory developments affecting the sector.
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. All investments involve risks, including possible loss of principal.
Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Templeton Distributors, Inc., One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com - Franklin Templeton Distributors, Inc. is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.
You need Adobe Acrobat Reader to view and print PDF documents. Download a free version from Adobe's website.
Franklin Templeton Distributors, Inc.
