Waiting for the stock market after the US presidential election

The race to the White House is in full swing. How will the upcoming US presidential election affect the Vietnamese stock market?

How do US stocks rise and fall after each election?

The US Presidential election is approaching with a mind-boggling battle taking place between two candidates: Democratic Vice President Kamala Harris and Republican candidate Former President Donald Trump.

There are many differences in the policies of the two parties' representatives. While Ms. Harris pursues free trade but focuses on international cooperation, maintaining many policies under Mr. Biden, Donald Trump supports bilateral trade and protects domestic industries.

Mirae Asset Securities Company recently compiled statistics on the history of the most recent US presidential elections from 1944-2020 and said that the US stock market was divided after the election day based on the victory between the Democratic and Republican parties.

In addition, statistics also show that 14/20 times the S&P 500 increased after 3 and 6 months, and 13/20 times the S&P 500 increased after 1 year from the end of the election. But 11/20 times decreased in T+5 and 10/20 times decreased in T+10.

US stock market performance after the election over time. Source: Mirae Asset

These numbers suggest that the stock market tends to take time to digest the policies of a new president, so the market will reflect the policies more clearly in the second and third years after the election. This results in a stronger stock market performance before the election, as well as a stronger performance in the first year after the election.

In terms of valuation, the S&P 500's P/E is currently at 21.9 times, higher than the three-year average of 18.8 times and the five-year average of 19.5 times. Thus, after the election, the US stock market may correct or slow down and move sideways in the short term, before the new policies can show their effectiveness through economic growth data.

Will not have much impact on Vietnamese stocks

The US presidential election will have more or less an impact on the Vietnamese economy. According to Mirae Asset's analysis, Donald Trump's rise to power will create many impacts and strong changes to current policies. Vietnam can benefit from shifting its supply chain from China, due to the US imposing high tariffs on imported goods from China. However, it will also face risks from domestic protectionist policies and strict US trade agreements such as increasing tariffs on imported goods from other countries by 10-20%. The US is currently Vietnam's largest export market, with computers, electronic products, components, and textiles being the main products.

If Kamala Harris takes office, there will not be many changes in policy. It will continue to inherit the policies under Biden. She advocates multilateral cooperation and promotes participation in international trade organizations. If Harris rejoins the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam will have an advantage because it is a member of this bloc, thereby promoting export activities.

Some sectors are likely to be impacted after the election, according to analysts. While Ms. Harris’s policies will not have much impact on Vietnam’s economy, Mr. Trump’s policies can have both positive and negative impacts.

Sectors that may be impacted after the US presidential election. Source: Mirae Asset

For example, the industrial real estate industry may benefit from the shift of FDI capital flows out of China, or the Oil and Gas industry is likely to benefit from Trump's tendency to invest heavily in energy and oil and gas exploitation. However, the Textile, Seafood, Phone Components, or Wood and Furniture industries will benefit from replacing Chinese products but will have to pay high taxes when imported into the US.

Overall, the upcoming election will not have much direct impact on the Vietnamese stock market. However, the VN-Index is always correlated with US stocks, so the short-term impact may be mild.

Source: https://baodautu.vn/ngong-thi-truong-chung-khoan-sau-bau-cu-tong-thong-my-d228712.html