UK - Uncertainty over the outcome of the US presidential election could be behind poor US equity performance in recent weeks, according to Schroders Investment Management Limited.
Voters will go to the polls tomorrow as incumbent President George Bush and Democrat challenger John Kerry vie for the spot.
Schroders said however, that the impact of the ever-higher oil price on potential earnings growth was admittedly much more significant.
“A ‘surprise’ Kerry victory would likely be taken by the equity market as overall negative news in the short term,” the firm asserted.
“Firstly, investors would be concerned that a President Kerry would be a more zealous regulator than President Bush.
“Second, President Bush also proposes a ‘statute of limitations’ on the amount of non-economic damages that can be paid in malpractice lawsuits. Such a statute of limitations would have clear benefits for the pharmaceutical and healthcare sectors – the most frequent payers of such ‘non-economic’ damages.”
But in Kerry’s defence Schroders added: “Most transparent and efficiently enforced regulation should be expected to increase equity returns and overall growth in the medium to long term, rather than diminish them.”
Schroders said the impact of the outcome of the election would “probably be less pronounced” in the bond market.
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