Iconiq Capital, which counts some of the world's most influential families as clients, broke down the investment implications of the US election. Here are the highlights of it's 23-page presentation.

  • Iconiq Capital, the Silicon Valley fund backed by billionaires including Mark Zuckerberg, recently compiled a 23-page slide deck on the 2020 election's investment implications.  
  • The report, seen by Business Insider, found that the stock market's long-term performance is not significantly impacted by which party occupies the White House.
  • It added, however, that policies for taxation, infrastructure spending, and healthcare would impact various sectors of the market differently. 
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On a long enough timeline, the American public's decision to elect either a Republican or Democrat for president makes very little difference to investors' returns. 

But after an election year that has been marred by a global pandemic, companies will likely struggle with weaker profits, revenues, and credit ratings for several years to come.     

These were some of the takeaways in a client report on the 2020 election's investment implications compiled by Iconiq Capital, the Silicon Valley fund backed by notable billionaire investors including Mark Zuckerberg and Jack Dorsey. The 23-page slide deck, which was seen by Business Insider, highlights how specific stock-market sectors could be impacted by the divergent proposals both parties are offering on three key issues: taxation, healthcare, and infrastructure spending.  

At a high level, the report's authors found very little connection between election results and the stock market's long-term performance. A hypothetical investor who made a 10-year, $10,000 investment at the beginning of every election year since 1936  would have only lost money once. That lone instance out of 19 was due to the 2008 crisis; an investment at the start of 2000 fell by 9% during the subsequent decade. 

Additionally, the market performed similarly regardless of whether a Republican or Democrat was in the White House. Going back to 1932, the median S&P 500 return on an annualized basis is 8.7% for Democratic wins and 9.3% for Republican wins.   

These broad, marketwide findings do not negate the fact that different party proposals have implications for specific sectors and industries. Iconiq capital highlighted three issues in particular: 

1. Taxation

Joe Biden's tax plan includes raising the rates on long-term capital gains and qualified dividends to 39.6% on income above $1 million, according to the Tax Foundation. The current rate is 20% for single individuals with more than $441,451 in taxable income and $496,601 for couples filing jointly. 

Such dividend tax increases have historically hurt sectors that are considered bond proxies because they offer dividend yields that rival fixed-income securities. The proxies include the real estate, utilities, and consumer discretionary sectors. 

Meanwhile, tax hikes on high-income individuals have been most negatively correlated with real estate stocks. 

2. Healthcare

Both parties would seek to rein in the soaring costs of healthcare spending and prescription-drug prices, Iconiq's report said.

But there are differences too: a Democratic majority would push to restore and expand the Affordable Care Act and implement features of a 'Medicare for All' policy. Republicans, on the other hand, would raise the bar for Medicare eligibility in order to lower costs.

Iconiq expects benefit managers, providers, and payors to be largely shielded from changes to Americans' healthcare coverage options. The fund also expects greater consolidation in the industry amid a broader shift towards more risk-sharing.

3. Infrastructure Spending

A Republican majority that prioritizes deregulation over new infrastructure funding would benefit companies engaged in energy exploration, production, and export, Iconiq's report said. But these gains could be offset by weak energy demand due to the continued US-China trade war. 

If Democrats prevail in the election, they could unleash their plan to invest $1.7 trillion into infrastructure at the federal level with an emphasis on repair and building a clean-energy grid. 

Outside of these specific areas that Democrats have outlined in their plans, the biggest estimated infrastructure spending shortfalls are in roadways and transit ($1.1 trillion), schools and parks ($482 billion), and electricity ($177 billion).  

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