Industry Updates

‘Biden bounce’ sees Japanese stocks hit 29-year high

Joe Biden is elected the 46th President of the United States of America

George Geddes

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The Japanese equity market reached a 29-year high last week as numerous equity markets saw significant performances in the build-up to Joe Biden’s win in the US Presidential election over the weekend.

The Japanese market saw a notable performance for the period as the Nikkei 225 climbed to 24,568 points by Friday’s close, levels not seen since October 1991.

ETFs with the exposure have produced impressive returns year-to-date, as the Xtrackers Nikkei 225 UCITS ETF (XDJP) returned 11.6% for the period. XDJP has also captured $100.7m net new asset YTD in tandem with the double-digit performance.

It is not just the Japanese market that has benefited from the Biden bounce. The US and much of Europe produced impressive returns last week and saw positive net flows.

The iShares Core S&P 500 UCITS ETF (CSPX) climbed by 7.4%. The $10.7bn ETF has added $383.8m assets to its total for the period as well.

Despite much of Europe going into national lockdowns for the second time this year, the UK, France and Germany also saw similar stories in terms of performance.

The Amundi MSCI France UCITS ETF (CF1) climbed 7.5% but also saw $4.3m outflows for the week. However, the Vanguard FTSE 100 UCITS ETF (VUKE) and the Xtrackers DAX UCITS ETF (XDAX) climbed 5.9% and 7.7%, respectively, and also saw $49.7m and $86.2m inflows.

Biden vs Trump: Sector ETFs to play if Democrats win US election

Commenting on Biden’s win, Stuart Clark, portfolio manager at Quilter Investors, said: “Markets seem to be embracing the news and have not been too unsettled by the lack of clarity last week brought. For long-term investors, it goes to show that this election is a timely reminder to block out the noise and not be swayed by certain political events.

“Infrastructure remains an area where we might see some cross-party collaboration and an area that should benefit investors over the next four years.”

Another area that is set to benefit from the election are sustainable strategies, however, this might not be to the same extent as originally expected.

Biden’s manifesto promised numerous pushes into sustainable-driven projects such as realigning the US with the Paris Agreement and enabling electric car manufacturers to expand the sector through the creation of one million jobs. But the Republicans’ view of these bids could limit how much Biden can implement.

Clark added: “Looking at what this election means for investors, it is likely that the extent of tax reforms, healthcare or the move to make the economy more environmentally friendly will have to be scaled back given the lack of Republican support."

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