It's anyone's guess which political side will win the US election. What happens across the Pacific could impact the ASX stock market in the short term and the long term.
Normally, 'macro' events like elections don't meaningfully impact the share market — or the economy — over the long term. However, there can occasionally be a real market mover, such as the COVID-19 pandemic.
This election seems more momentous than many others in living memory. The two candidates offer quite different visions of inflation, corporate taxation, tariffs, and so on.
Hopefully, this election will not be decided in court like the 2000 US election.
I'm not going to try to predict who will win. But I will share my thoughts on what I plan to do if the ASX stock market declines.
Volatility happens
Firstly, I'll say that it's common for the share market to experience ups and downs. So, even if there is a market reaction to the election, it doesn't necessarily mean we need to do anything. It's also quite possible there may not be any market reaction at all.
I don't believe either candidate wants the US economy or US businesses to be weaker through their policies.
Ultimately, I don't believe that either candidate's victory should warrant an Aussie investor deciding to sell all of their shares or all of their US shares.
I'm planning to invest in the ASX stock market
When share prices fall across the board, I get excited, regardless of the reason why.
A legitimate reason usually spurs sell-offs, so it can take bravery to look through the pain and decide to invest. Being able to buy at better valuations is compelling.
As Warren Buffett, one of the world's greatest investors, once said:
Be fearful when others are greedy and greedy when others are fearful.
If the ASX stock market sells off this week due to US election developments, I'll invest. Sometimes, investors will sell ASX shares even if they're not likely to see much operational impact.
Will US politics impact (for example) demand for food, business software, commercial property or telecommunications in Australia? I'd say probably not.
If the ASX stock market does noticeably sell-off, some of the businesses I'll be looking at include Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Telstra Group Ltd (ASX: TLS), Centuria Industrial Group (ASX: CIP), Rural Funds Group (ASX: RFF), Universal Store Holdings Ltd (ASX: UNI), Cleanaway Waste Management Ltd (ASX: CWY), Wesfarmers Ltd (ASX: WES) and TechnologyOne Ltd (ASX: TNE).
I think the above businesses, among others, still have plenty of growth potential no matter what happens.
If share prices decline (or increase) in the longer term, I'll still want to invest. I believe in the long-term earnings growth potential of the (ASX) stock market.
As Warren Buffett said:
To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
