The race for the White House is in its final weeks and Americans will soon decide who will be the next president of the United States. This election season has certainly been emotionally charged and, in many ways, unlike any we've seen in recent history. For many, Hillary Clinton represents the continuation of Democratic policies currently in place under the Obama administration. Donald Trump, on the other hand, represents the potential for a shift in policy.

After hitting the campaign trail hard since their respective party conventions, Clinton and Trump now turn their attention to a series of debates, where each candidate will provide voters with more detail about key elements of their plan. Undoubtedly, those who are watching will be wondering how these policy positions will affect their financial well-being and what it means for the U.S. economy.

Key Platform Issues

The influence of policy platform issues on the direction of the economy has historically been a key issue for many voters. The U.S. is in the midst of the longest economic expansion in history, but one that has been slow, leading many Americans to even more closely examine the economic implications of proposed policies. It's important to remember, however, that while political policy issues can certainly have an impact on the direction of the economy and financial markets, other more important factors, such as corporate earnings, interest rates and inflation, can have a far greater influence.

With that in mind, Exhibit 1 highlights several key policy issues and their potential economic impact. However, it is key to understand that what is proposed on the campaign trail is often very different than what ultimately makes its way through the U.S. Congress, which can limit the potential economic impact.

Exhibit 1: Key Issues and Potential Economic Impact

 

What's Next?

The stock market is currently pricing in a Clinton victory. This is consistent with several election polls that show Clinton leading Trump, including Gallup and The New York Times and polling aggregators, such as RealClearPolitics and FiveThirtyEight. In most recent polling, Clinton's advantage has been narrowing. Historically, equity market uncertainty typically increases sharply before the election. We expect this election cycle to be no different, with a pickup in volatility leading up to and following the election, especially if the outcome is a surprise.

In my next Investment Update, I'll offer my thoughts on the U.S. election, provide insights based on what history tells us and discuss any potential investment implications. For now, it is best for investors to sit back and watch the debates, but avoid making any emotionally-charged investment decisions solely based on U.S. election uncertainty.

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