election uncertainty should not deter long-term investment strategies

The upcoming U.S. presidential election has not deterred the equity markets, as they continue to show resilience. The S&P 500 has reached its 47th all-time high this year, indicating strong investor confidence.

Positive Fundamentals of the Equity Market

Despite the uncertainty surrounding the election, analysts believe that the positive fundamentals of the equity market will not be disrupted. The third-quarter results of S&P 500 companies reflect optimism among bank management teams, with many surpassing earnings estimates and sales expectations. Consumer spending remains steady, and there is promising demand for artificial intelligence technologies.

Expected Interest Rate Cut and Earnings Growth

The Federal Reserve is expected to lower interest rates further, which could contribute to an 11% growth in S&P 500 earnings for this year and an 8% increase in 2025. Investors are advised not to make drastic portfolio adjustments based solely on anticipated election outcomes. Historical data suggests that U.S. equities typically rise before and after presidential elections.

Policy Implications and Market Outlook

The policy implications for the equity market will depend on the actual implementation and sequencing of policies post-election. While there may be initial market optimism if Donald Trump wins, concerns over potential tariff and deficit risks could temper this. Similarly, while Kamala Harris's policy platform may raise concerns, many of her proposals are unlikely to be enacted. The uncertainty surrounding the election outcome may lead to a period of volatility, with potential delays in the final results. Investors are encouraged to maintain their positions in the market and consider hedging strategies.

Long-Term Market Trajectory

The current economic landscape, characterized by strong corporate earnings and consumer spending, provides a solid foundation for equity markets. The long-term trajectory of the market is influenced by broader economic indicators and corporate performance, not just short-term political events. Investors should remain vigilant and focus on the fundamentals that drive equity performance.

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