US election outcome upholds ‘status quo’
Investors should expect another gridlocked environment in the US Government as neither party is likely to gain full control.
Currently, Democratic Party candidate Joe Biden was likely to win the Presidency, with his party holding onto the House of Representatives, but the Republican Party will hold onto the Senate preventing easy passage of legislation through both houses.
Fred Pollock, Grosvenor Capital Management (GCM) managing director, said it was a status quo outcome for investors.
“If you have the blue wave and all Democratic [Party] control, you would have seen a very aligned political set of actions,” Pollock said.
“Largely what we’ll do is just continue doing what we’re doing, same tax policy, same types of investments.
“I do think it’ll favour certain sectors: healthcare and technology would continue to be favoured sectors because of the response to COVID-19 is more likely to be conservative rather than aggressive in terms of lockdowns and other types of responses.
Pollock said to expect less fiscal stimulus and more central bank intervention, which meant lower rates for longer and less deficit spending.
“It doesn’t directly hit a lot of our portfolio companies but the more important thing is that in a gridlocked environment, you’d see many more executive [orders] from the Biden administration because that will be the thing they can do,” Pollock said.
“Those executive actions will cause significant winners and losers in the marketplace and it’s important to understand that.
“The energy sector would be a loser, not everywhere, but you would argue that’s something where actions can be taken but probably not as much as if you had a blue wave and you had legislative action, so it’s a negative but not as negative.”
GCM manages the Pengana Private Equity Trust which had lost 6.72% over the year to 4 November, 2020, according to FE Analytics.
“What we do as a business is we find great sponsors who know what they’re doing, are investing over five to 10 year periods and generate real multiples on their capital,” Pollock said.
“That’s not going to change, we would’ve done that regardless of what combination won, so if we’re wrong and it turns out President Trump retains the White House or the Senate goes to the Democrats, it’s not going to fundamentally alter what we do.”
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