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Sam Dickie: Fisher Funds expert on the economic impact of the US mid-terms · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
• 0:13
  Speaker 1: and our wide range of podcasts now on iHeartRadio. Sam Dickey,
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  Speaker 1: Fisher Funds is with us. Hello, Sam. Good evening here. Now,
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  Speaker 1: we have America going to the polls in four weeks
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  Speaker 1: for the midterms. What do you reckon is at stake
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  Speaker 1: here for investors? Yes, November 3rd, every seat in the House,
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  Speaker 1: about a third of the Senate and 35 to 40 governorships.
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  Speaker 1: And the betting markets, the prediction markets have swung hard.
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  Speaker 1: So the Democrats are now heavily favoured to take the House,
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  Speaker 1: more than 90%. And in recent weeks, they have moved
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  Speaker 1: from behind to favourites to take the Senate. And that's
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  Speaker 1: largely because Trump's approval rating is less than 40%. And
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  Speaker 1: that's pretty textbook that when a president's approval rating falls
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  Speaker 1: so low, two years into the presidency, the president's party
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  Speaker 1: usually gets punished. So the likely outcome is gridlock, a
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  Speaker 1: president facing a lawmaking body, so the House and the Senate,
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  Speaker 1: controlled by the opposition, which is not ideal for President Trump. No,
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  Speaker 1: not at all. Do elections actually move markets? No, almost
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  Speaker 1: never for any meaningful period. And we've talked about this before.
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  Speaker 1: And the best example is Donald Trump himself. And in 2016,
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  Speaker 1: the market was certain he would not win and certain
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  Speaker 1: that in the unlikely event he did, stock markets would crash.
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  Speaker 1: He won, and the U.S. market rose over 20% over
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  Speaker 1: the next 12 months, the lesson being that politics is
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  Speaker 1: often the loudest thing in the room, but usually the
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  Speaker 1: least important thing for markets, ideally. Hasn't Trump changed that
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  Speaker 1: in recent days? He certainly tried to move markets in
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  Speaker 1: the last year or so, so a trade war, a
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  Speaker 1: shooting war, oil near $ 100 and openly leaning on the
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  Speaker 1: Federal Reserve, but yet share markets are near all-time highs
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  Speaker 1: in the U.S., And that's because what actually drives markets
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  Speaker 1: is much more boring. So it's corporate profits, interest rates,
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  Speaker 1: and economic growth. And two of those three things, company
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  Speaker 1: profits and economic growth, have been remarkably resilient. So what
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  Speaker 1: does this mean for investors then? I think markets don't
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  Speaker 1: really have a favourite party. They have a favourite outcome,
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  Speaker 1: which is less uncertainty. And gridlock can actually deliver that.
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  Speaker 1: So fewer big policy changes, fewer surprises. And... as you
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  Speaker 1: and I have talked a lot about, watch the bond market.
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  Speaker 1: America's $ 40 trillion of debt is critically important, much more
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  Speaker 1: important than politics. And the fact that investors are demanding
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  Speaker 1: higher interest rates to finance it is important. So a
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  Speaker 1: divided Congress or a divided lawmaking apparatus makes another big
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  Speaker 1: government spending splurge harder. So political paralysis could actually be
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  Speaker 1: good news for bonds. So The next four weeks, look
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  Speaker 1: out for an enormous amount of noise and probably very
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  Speaker 1: little new information about long-term corporate profits which drive stock markets. Interesting. Hey,
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  Speaker 1: thank you very much. As always, Sam, it's good to
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  Speaker 1: talk to you. Sam Dickey of Fisher Funds.