In a race that many believe is too close to call, voters in the US go to the polls on 5 November to decide whether Kamala Harris or Donald J Trump will be their next president. 

But why does this matter to UK investors? 

Well, the U.S. is the world’s largest economy, and American companies make up a significant portion of many portfolios. This means that the presidency, and the policies introduced, can have a direct impact on investment performance.

Let’s take a look at what this could mean for UK investors as the race for the White House draws near.

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Harris Win:

Markets have performed well under Biden and we could most likely expect a continuation of Democratic policies focused on increased government spending and social mobility which can boost consumer spending.

On the other hand, Harris's administration may also advocate for higher corporate taxes and tighter regulations which can hurt certain parts of the economy.

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Trump Win:

A return to a Trump presidency could be viewed favourably by the stock market due to expectations of lower taxes and deregulation, which tend to benefit corporations and markets overall. 

However, concerns over potential trade tensions and unpredictability in foreign policy could destabilise the economy and drive inflation.

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Zooming out:

Historically, markets tend to be more volatile in the months leading up to the election due to uncertainty. However, they generally stabilise and can often rally after a clear winner is identified.

While historical data shows slightly stronger returns under Democratic presidents, market preferences are shaped more by economic conditions and policies rather than party affiliation alone.

Stock market's performance tends to follow a predictable cycle tied to the presidential term. Historically, the third year of a presidency has shown the strongest returns, as politicians focus on boosting economic growth ahead of the next election.

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Invest in the USA today: 

If you would like to invest in US companies, head over to the ‘Invest’ tab in your Chip app with funds like the S&P 500 ETF and S&P 500 Tech ETF.

Whichever way it goes, remember to focus on your long-term goals rather than short-term fluctuations and making sure your investments are diversified can help manage risks during this period of uncertainty.

‍Thanks for reading,
Stephen 

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‍When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment. Chip does not provide financial or tax advice and this is not a personal recommendation.