Biden in front, market shifts

Joe Biden favours small business, small cap firms take off

Opinion
While US President Donald Trump has been released from hospital after contracting COVID-19. Markets are waiting to see if he has the vigour to continue campaigning through the final weeks to the election.

While US President Donald Trump has been released from hospital after contracting COVID-19. Markets are waiting to see if he has the vigour to continue campaigning through the final weeks to the election.

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Wiht Joe Biden leading in the US presidential campaign, the market adjusts, expecting he'll win.

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Equity markets were mixed during the week with the S&P 500 and NASDAQ up approximately 1.5 per cent week on week, whereas the the ASX 200 was down 2.9pc.

News that Donald Trump had tested postitive for COVID-19 rocked markets on Friday with the NASDAQ falling 2.2pc.

There is much focus on Donald Trump's ability to continue campaigning considering the election is in less than a month.

Also impacting markets is the perception that Joe Biden seems to be favourite for the US election as he now leads the polls in all of the crucial swing states.

Markets have also begun to price in the prosepct of a Biden victory, which is evident through the outperformance of US small cap indexes as opposed to large cap indexes.

It is anticipated that if Biden were elected, his policies will favour smaller companies as opposed to larger ones in regards to corporate taxes and regulation.

It is anticipated that if Biden were elected, his policies will favour smaller companies as opposed to larger ones in regards to corporate taxes and regulation.

Further evidence of the US economic slowdown was seen in Friday's US non-farm payroll data.

Non-farm payroll data shows how many people are employed in construction, manufacturing and goods industries.

The data showed a slowdown in the pace of the labour market improvement with employment rising by 661,000 against an expected 859,000.

To date, only just over half of the 22.2 million jobs that were lost since the pandemic began have been recovered.

Incomes down yet household spend up

Additional reports also highlighted that in August, incomes in the US fell by 2.7pc and spending rose by 1pc.

This indicates that people are tapping into their savings to maintain their consumption.

Both of these reports highlight the need for a new fiscal support package to add further stimulus to the weakening US economy.

Despite this there was an unexpected increase in the US ISM services index, which indicates an improvement in the manufacturing sector.

Looking ahead, markets will be carefully watching Donald Trump's health as he recovers from COVID-19 as well as any indication of a US fiscal policy agreement.

In Australia, investors will assess the results of the federal budget and any stimulus that the RBA may implement going forward.

  • This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited.

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