Sunday, 14 April 2024 14:19

Politics are Shaping Portfolio Construction

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Emerging market assets often witness significant yet brief fluctuations around Election Day, with their performance linked to the electoral outcome. Historical data suggests that emerging market assets fare better during periods of a unified US government or with a Democratic president. However, this data is limited, spanning only eight presidential election cycles. 


To gauge this year's potential impact on emerging markets, it's crucial to analyze key channels of influence, including changes in US macroeconomic variables, trade policy, and geopolitics. The outcome of the US election could significantly affect these factors, influencing emerging market assets. Trump's presidency might lead to faster US economic growth but increase uncertainty in trade and geopolitics, while a Biden presidency could maintain the status quo. 


Despite political considerations, long-term portfolio construction should remain impartial, with emerging market assets playing a pivotal role due to their diversification benefits and potential for higher returns. 

Finsum: Don’t let political biases crowd out your investment decisions.

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