However, a Clinton presidency would not be without risks, particularly for the healthcare sector, which accounts for just over 11 per cent of the FTSE 100. Both the UK and global healthcare sectors rely on the US market as a significant driver of profits, which Mrs Clinton’s proposed pricing reforms could threaten.
This has already led US healthcare stocks to sell off this year, making them cheap compared to other defensive sectors. While I believe this is overdone given the restricting role of Congress, UK healthcare stocks have yet to price in any potential danger from a Clinton presidency.
There are other factors to consider too. Both Hillary Clinton and Donald Trump have promised higher fiscal spending, though Trump’s package is bigger. Whoever wins, both candidates’ commitment to public expenditure should be positive for US growth and have a beneficial knock on impact on global growth more broadly – providing either set of proposals get past Congress.
While the direct impact of US domestic growth on the UK might be minimal, it is particularly important that the economy of the UK’s primary trading partner remains healthy when existing trading patterns (that is, with the EU) are likely to face disruption.
Seen in this light, it could be argued that the UK is more exposed to US election risk than the numbers alone show. The direction of US foreign policy is also a factor to consider, particularly if a President Trump resulted in escalating trade and/or currency wars.
Yet there might be at least some benefits to a Trump presidency. Perhaps the greatest unknown would be his attitude towards a trade deal with the UK. Any potential opening would be well received by UK markets, which would price in wider optimism about future US and global trade relations. Mr Trump has already disagreed with Barack Obama’s warnings about UK-US trade post-Brexit, saying that the UK "would certainly not be at the back of queue". While he has been hostile about Chinese and Mexican trade, the UK’s natural strength in exporting services is unlikely to fire up the protectionist passions of blue collar workers.
The result of the US election and consequences for the US dollar are likely to have an impact of UK equities, with this largely being felt by the FTSE 100. The more domestically focused FTSE 250 should be comparatively well shielded, though it is worth remembering the US is still the UK’s largest export partner.
While both candidates are likely to see their policies watered down by Congress, a Clinton presidency would likely represent the greater risk for individual sectors, with a President Trump threatening wider risk-off moves.
James Bateman is chief investment officer of multi asset at Fidelity International
