The world is a much more interconnected place than it was a decade ago. The same applies to stock markets. Events around the world can impact the market of a completely different country. For example, when unrest in Hong Kong was turning violent last year, the FTSE 100 fell. With this in mind, UK investors need to keep an eye out for potential influences on the FTSE 100 price caused by external factors. US President Donald Trump is one such factor that could have an influence this month on the FTSE 100 price.
How could Trump affect the Footsie?
First up is the recent news that Trump has tested positive for Covid-19, and is currently in hospital. When the news broke late last week, US equities fell. The FTSE 100 also fell. Why? Well, one of the most important men globally potentially being seriously ill has huge ramifications. Should he be unable to overcome the virus then a lot of issues need to be sorted quickly. After all, he’s the head of the largest economy in the world.
This impacts the companies listed on the FTSE 100. Many trade in the US, and so would be impacted by any developments. The bottom line is that how Trump copes with the virus will impact the FTSE 100.
The next way Donald Trump could impact the FTSE 100 is via the run-up to the election. It may be taking place in early November, but key election debates and polls will shift the market throughout this month. As I’ve written about before, a Trump victory could be taken as a positive for stock markets. A Democrat victory could be taken as the opposite — although nothing is certain.Â
Again, the FTSE 100 will likely mirror the moves seen in the US stock markets as the campaigns progress this month. It’s therefore a good idea to keep an eye on the polls in the coming weeks.
Finally, Donald Trump could shift the FTSE 100 price via sentiment towards Brexit and a UK-US trade deal. The key EU-UK summit on 15-16 October is coming up, where some think a deal could be struck. Trump is a fan of Brexit, and may publicly comment on negotiations again to try and sway things. He may also dangle the carrot of good terms of a future UK-US trade deal. This could not only help his popularity at home during the election campaign, but also help in cementing positive UK relations if he wins the election.
How to position your portfolio?
Trump’s potential impact via Covid-19 is largely a negative, although some of the risk is already priced in. If he wins the election, and comments on Brexit, then it’s likely positive for stocks. So I’d be looking to stay invested in stocks that could benefit, and would even buy particular stocks if the firm has a large exposure to the US. For example, British American Tobacco is a business that could benefit. Royal Dutch Shell is another case and has a dual listing in the UK and US.