The looming US presidential election in November, between incumbent Joe Biden and former president Donald Trump, presents the greatest headwind for investors in 2024, warns the CEO of one of the world’s largest independent financial advisory and asset management organisations.
The warning from Nigel Green of deVere Group comes as the race for the White House – and to be the CEO of the world’s largest economy – heats up.
Biden and Trump are now tied if third-party candidates like Robert F. Kennedy Jr. are on the ballot, according to two recent surveys that show Kennedy is gathering considerable support with independent voters.
The deVere Group chief executive says: “The US is currently more divided ideologically and politically than at any time since the 1850s, when tensions boiled over into civil war.
“This deep division, combined with the potential for significant civil unrest, creates a highly volatile environment for investors in the world’s largest economy.
“Currently, we put the chances of a second American Civil War at around 25%.
“While this may sound alarmist, the mere consideration of such a possibility highlights the severity of the current political climate and the need for investors to be aware of the risks.”
The events of January 6, 2021, when the Capitol was stormed by an angry mob, serve as a stark reminder of how quickly political tensions can escalate into violence.
These scenes were a shocking indicator of the potential for widespread civil unrest.
Donald Trump’s recent historic criminal conviction has added another layer of unpredictability to the 2024 presidential campaign.
“As the frontrunner for the Republican nomination, Trump’s legal battles introduce unprecedented uncertainty. Investors must now consider the potential impacts of a candidate who might face significant legal challenges while running for the highest office in the land.
“This situation raises further concerns about the stability of US governance and the rule of law, critical factors for maintaining investor confidence,” notes Nigel Green.
The heightened political risk associated with the upcoming election is likely to lead to significant market volatility.
“Investors are now facing increased risks due to the potential for regulatory changes, shifts in trade policies, and broader economic instability. To mitigate these risks, it’s crucial for investors to consider diversifying their portfolios.
“Many savvy investors will be moving some assets out of the US to protect against potential losses resulting from the election’s outcome and the subsequent potential political turmoil.”
Diversification is a key strategy for managing investment risk in times of uncertainty. By reallocating investments across different regions and sectors, investors can reduce their exposure to US-specific risks.
The deVere CEO explains: “The outcome of the US election will have far-reaching global implications, influencing international trade policies, foreign relations, and economic partnerships.
“Therefore, international diversification can help investors shield their portfolios from US-centric political risks.”
He concludes: “Over the coming months, investors need to be managing the risks associated with one of the most unpredictable and significant elections in US history.”
