This Saturday marks one month until the US Presidential election, which takes place on 8 November 2016. The first of the Presidential debates have now taken place, attracting record television audiences. Attention will now turn to the next two, scheduled for the 9 and 19 October. Hillary Clinton was perceived to have performed best in the first and Donald Trump will need a more measured performance in the subsequent debates particularly following negative media coverage of some of his recent comments.

This media circus attracts a lot of attention but does it really have any impact on personal investors?

As with many large scale political events, although sentiment can drive markets in the short term, in the longer term focus returns to the fundamentals that drive company valuations such as earnings. This can be seen in the UK where the Brexit vote drove markets down in the immediate aftermath only for them to recover strongly once the impact of the lower value of Sterling on overseas earnings had been fully understood.

The US markets will look to the polls for an indication of the outcome and recent polls have suggested Hilary Clinton is beginning to re-establish a bit of a lead. Markets will likely take this as a positive with concerns that a Donald Trump presidency may be negative for international relations and global trade.

Presidential power?

So, much is seen to hinge on the US Presidential election when in reality the power of the President is not as great as some may imagine and company valuations will be driven more by the strength of the dollar, international trade agreements and the Federal Reserve’s next interest rate move.

The market will take the election itself in its stride, regardless of the outcome, and rapidly turn its attention to the Federal Reserve meeting in December when interest rates may be nudged higher again – something which may adversely impact the value of US equities as it would signal a continued move towards a tightening of monetary policy. This could be a positive for UK listed stocks with US or dollar based operations as sterling may fall further against the dollar boosting dollar based revenues and earnings.

Policy announcements

Investors should therefore watch the US Presidential election with interest, most notably picking up any indications of the likely approach of the US to international trade. Investors should also watch out for any policy announcements which could impact specific sectors – e.g. healthcare or financial services.

Investors should always look to the fundamentals of a company’s performance and then pay close attention to Janet Yellen (Chair of the Federal Reserve) and her next pronouncements on interest rates and the health of the US economy.

October can often be a volatile month and in the run up to the last three Presidential election investors have had to nurse losses during October. In October 2004 the Dow Jones Industrial Average fell 1.4%, it fell 13.9% in October 2008 and 3.1% in October 2012.

Richard Stone is chief executive of The Share Centre