With less than three weeks to the midterm elections, the question remains as to what impact this could have on investments.
According to the fourth-quarter 2018 Eaton Vance Advisor Top-of-Mind Index Survey, 65% of the advisors surveyed think the midterm elections will have some kind of effect on client investment portfolios. Broken down, 45% believe the midterms will have a positive effect and 20% believe they will have a negative effect.
During Eaton Vance’s annual investment perspectives media luncheon in New York, four different experts weighed in on the midterms’ potential impact.
According to some, like Richard Bernstein, politics may not have as much of an impact as these advisors think.
Bernstein said that the the midterm elections do not have a meaningful impact on his investment outlook. Bernstein is CEO and chief investment officer of Richard Bernstein Advisors LLC, an independent investment advisor that subadvises two Eaton Vance mutual funds.
“One of my first bosses on Wall Street really pounded into me that it’s ‘profits not politics that move the markets,’” Bernstein said.
While he admits politics can have a short-term impact, the focus should be on fundamentals — both of companies and of the economy — because that’s what’s going to drive the markets longer term.
“Could you have volatility in November around the elections? Yeah, probably,” he said. “The question is if you have volatility and the markets go down … the question is do you buy or do you run away? And that answer is going to depend on the fundamentals. It’s not going to depend on the politics.”
Bernstein said his firm doesn’t look at short-term politics.
“Clearly, the fundamentals of the economy don’t change tweet by tweet,” he said.
One of the predictions that was made after the 2016 election was that there would be a “Trump bump” in responsible or environmental, social and governance (ESG) investing as a potential reaction to Donald Trump’s presidency.
According to Jade Huang, an ESG senior equity analyst for Calvert Research and Management, there was a “bit of a ‘Trump bump.’” Calvert Research and Management is a wholly owned subsidiary of Eaton Vance Management.
However, Huang thinks the midterms won’t have a huge impact on the demand for responsible investing.
“There is enough impact being driven from consumer trends and interests for healthier products, cleaner air, cleaner environment, that are really driving companies regardless of the policy environment,” Huang explained. “We kind of saw that after the Paris agreement and the U.S. withdrawal, that states went ahead, corporations continued to go ahead and that momentum continues.”