“Over the medium to long term, we would likely see further dollar strength under a Clinton presidency, with the potential for more supportive fiscal policy to boost the economy and strengthen the case for tightening monetary policy,” said Bateman. “This would help to boost the US dollar.”
“More widely, a Democrat victory would also represent a broad continuation of the US’s global role,” he continued. “This would also be supportive for internationally exposed UK companies, particularly those with emerging market exposure, which rely on the relative openness on the international system.”
By contrast, President Trump would threaten wider risk-off moves in the immediate aftermath of the result and be the “short term nemesis” of dollar strength, said Bateman.
“It is hard to see how the dollar would not sell off in reaction to a Trump win, with his nativist sentiment and economic isolationism clearly detrimental to the US economy. Yet in the event of a Trump victory, UK investors would risk being on the losing side of a dollar-sterling battle for the ugliest currency award. While weaker sterling (and higher UK inflation) would undermine support for the domestically exposed FTSE 250, sterling strength would undermine the gains UK investors in the FTSE 100 have seen thus far,” he concluded.
Another major concern for UK and other foreign investors is the future president’s policy on trade. While commentators haven’t been uniformly positive about trade prospects under Clinton or Trump, most have generally accepted that Trump’s brand of isolationism would be more severe and restrictive.
Head of Charlotte Square Investment Managers William Forsythe says there are bearish arguments to be made about either candidate coming out on top. “Everyone focuses on the extreme comments of Trump about Mexican walls and the like,” he said. “He is an American first advocate and would be quite severe on the trade front. But Clinton is not very expansionist either. She is talking about rolling back on the Trans Pacific-Partnership agreement, which is also pretty scary stuff.”
“The last thing you want is to slacken trade with all the global debt we have currently,” Forsythe argued. “We hope and believe equities will continue to progress, but we do have a couple of absolute return holdings, if things turn sour. The bears could make a strong argument for dislocation on the debt side of the equation.”