Podcast: Trump vs. Biden: How the U.S. Election Could Impact Markets - May 15, 2024

With the 2024 U.S. presidential election just under six months away, headlines are heating up. In today’s episode, Portfolio Managers Chris Heakes, Matt Montemurro, and your host, Mckenzie Box, explore what the outcome could mean for your investments. They also discuss oil prices, opportunities outside of Canada, and the latest U.S. inflation print.

McKenzie Box is Vice President of Product Management and Strategy at BMO Global Asset Management. She is joined on the podcast by Chris Heakes and Matt Montemurro, Portfolio Managers and ETF Specialists at BMO Global Asset Management. The episode was recorded live on Wednesday, May 15, 2024.

Episode Summary

Upcoming U.S. Elections

We’re just six month away from the U.S. presidential election in November and whether it is a Republican or Democrat win, it doesn’t change the fact that the U.S. has one of the strongest economies and consumers, which in the long term is positive for U.S. equities. Both Biden and Trump have an element of protectionism that has come out of deglobalization. That along with taxes are both big themes. There are significant personal tax cuts that are coming due in 2026. Trump pledges to keep those tax rates low, Biden is suggesting to only keep those tax cuts if you are under a certain income threshold. Both candidates’ proposed policies can be viewed as inflationary. Election time brings about uncertainty, which can also create volatility, so it is an opportunity to make portfolios more robust. Perhaps improving a traditional 60/40 portfolio by adding some gold bullion to help provide diversification to the overall portfolio.

• BMO Gold Bullion ETF (Ticker: ZGLD)

Oil Prices

West Texas Intermediate (WTI) crude prices have declined below $80 per barrel, falling from their April highs. Likely due to geopolitical risks, rather than a fundamental shift in supply and demand. The conflict in the Middle East has probably drove prices higher, but some of those concerns have been fading. With potential higher rates for longer, you could also see slower growth. Organization of the Petroleum Exporting Countries (OPEC) met on Tuesday and they announced that they’re sticking to their forecast of relatively strong global demand for 2024. We are also seeing wildfires plaguing Western Canada that can have an impact on oil prices. It could be a supply shock that sends prices shooting upwards. Our Multi-Asset Solutions Team (MAST) is neutral on energy, with some upside from here. They are targeting a $80-$90 range per barrel.

• BMO Equal Weight Oil & Gas Index ETF (Ticker: ZEO)

International Equities

There are lot of opportunities in foreign markets and ETFs are great tools for exposure outside of North America. Just looking at Japan and India, which had excellent returns over the past few years. The fundament economic conditions have been improving in Japan, with the government being very business friendly. Inflation has come back a bit in Japan, which is good for their economy. Warren Buffet has been increasing his holdings in Japan. India has been a kind of a darling of emerging markets for many years. Their gross domestic product (GDP) growth is at about 8% and it’s actually been accelerating coming out of COVID. The rise of their middle class is one of their most attractive stories. A good portion of the population does not have a smartphone, so there is room for growth. If it suits your risk tolerance, India can be an excellent growth opportunity. 

• BMO MSCI India ESG Leaders Index ETF (Ticker: ZID)

U.S. Inflation Print

After three consecutive hotter than expected Consumer Price Index (CPI) prints, the U.S. finally got a little reprieve from rising prices. Year-over-year inflation printed at 3.4%, which was in line with expectations. This calmed fears that interest rates were not high enough to calm inflation. Both headline and core prices rose by 0.3%. In April, a tick slower than the increases that registered in March, that left the annual rate of headline inflation decelerating to 3.4%, and core inflation at 3.6%. In addition to CPI, we also saw retail sales stall a bit, so we are starting to see some evidence that the U.S. economy is slowing, which gives the Fed some room to exhale. Yields have fallen across the curve with the recent inflation print, and as a result risk assets have been responding well.

• BMO Short-Term US Treasury Bond Index ETF (Ticker: ZTS)

ZMMK, total returns as at 2024/04/30: 1yr: 5.18%, 2yr: 4.26%, SI: 3.57%

ZID, total returns as at 2024/04/30: 1yr: 25.50%, 3yr: 12.57%, 5yr: 11.14%, 10yr: 13.46%, SI: 8.89%