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Billionaire investor Ken Griffin predicts new market highs after the presidential election. Here’s why.

Billionaire investor Ken Griffin predicts new market highs after the presidential election. Here’s why.

One of the factors increasing market uncertainty is the presidential election.

The market had a great year, but has cooled off recently. Reference point S&P500 Index dropped a little less than 1% in October. One of the factors that may prevent the market from extending the bull market is the upcoming US presidential election. Polls show the race between Vice President Kamala Harris and former President Donald Trump to be extremely close.

Regardless of who wins, billionaire investor Ken Griffin predicts that the market will hit new all-time highs after the election. Here’s why.

Clarification of uncertainty

Although the market is said to be climbing “wall of worries”, uncertainty rarely seems to be an investor’s friend and can push many people to the margins. This is especially discouraging for professionals managing millions of dollars, who could potentially lose their job if they have a bad year.

The presidential election between Harris and Trump brought nothing but uncertainty. The race is tight and both candidates would introduce different regulatory regimes, tax policies, and other plans which could affect the economy and inflation to varying degrees. Investors likely prefer Trump’s tax plans because he would likely keep corporate taxes lower, or at least current levels, and attempt to extend the tax cuts his administration implemented in 2017. However, investors likely aren’t as enthused about Trump’s tariff plans; global markets struggled as Trump tapped into them during his first term.

On the other hand, Harris is likely to propose raising the corporate income tax rate and some taxes on millionaires and billionaires. However, Harris also proposed many plans to aid the low- and middle-income classes, which could increase overall gross domestic product.

It will be too winners and losers on the stock market, depending on who wins. The stakes are high in cryptocurrencies, banking, home building and electric vehicles, among others. Many investors are trying to position or potentially hedge their portfolios based on which candidates they think will win, and other investors may wait until after the election.

Billionaire investor Ken Griffin seems to think so. Griffin is the CEO of Citadel, one of the largest hedge funds in the world, so Wall Street usually pays close attention. Speaking at the Future Investment Initiative forum in Saudi Arabia this week, Griffin said he thinks waiting for the elections is more stressful than anything else:

Reducing uncertainty is almost always positive for asset prices and we’re at a moment of peak uncertainty in a race where Trump is favored to win, but it’s almost a coin toss, so I’d say post-election we’ll generally see a risk-on environment as people adapt and adopt a new regime, whether it is the Harris regime or the Trump regime, this uncertainty will remain behind us.

Griffin may be on to something. While market did better or worse for some parties, and depending on who controls Congress, the Vanguard study found no statistical correlation between the performance of a common investment portfolio (60% stocks and 40% bonds) in presidential election years and non-election years.

There are so many different factors influencing markets at any given time, Vanguard believes it is difficult to attribute market performance to one specific cause, even one as seemingly significant as the U.S. presidential election.

Expect short-term volatility, but don’t panic

The market is likely to be highly volatile over the next few weeks due to a number of important factors, including the election, the upcoming Federal Reserve meeting and ongoing geopolitical tensions. However, the conclusion of the election should allow the market to leave one big uncertainty in hindsight, potentially paving the way for the market to continue rising and reach new all-time highs. Long-term investors don’t need to worry about short-term volatility, but they should try to understand why it happens so they don’t get caught off guard and can therefore make better decisions.

Berkowitz Gate has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has information disclosure policy.