Shortly after midnight on the designated day, voters in some areas of New Hampshire, USA, began casting their ballots, marking the official start of the 2024 US presidential election voting. How will the outcome of the US election permeate into the US economy? One prevailing view in the market currently is that regardless of who wins, as long as the result of the US election is finalized, it will be good news for the market.

Professor Hu Jie, a former senior economist at the Federal Reserve and now a professor at the Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, told First Financial News in an interview: "Overall, the change of the U.S. president has a relatively insignificant direct impact on the U.S. economy. Although the U.S. administrative system can influence the economy through certain policy tools, the reach of such interventions is relatively limited." Hu Jie further explained to reporters that different election outcomes might have some impact on specific industries, but generally, they would not bring significant shocks to the economy, only causing short-term minor adjustments. "This situation is also reflected in the U.S. stock market, where the long-term impact on the market is not significantly different regardless of who is elected," he added.

The underlying logic of elections and the U.S. economy generally involves two major factors affecting financial markets: monetary policy and fiscal policy. Hu Jie noted that in the realm of fiscal policy, this is the area where the U.S. President has the most direct influence. "After the U.S. Treasury presents the budget proposal, it still requires approval from the U.S. Congress, and the President has some room for strategic adjustments during this process." He added that secondly, the President also has some influence over industrial policies, as their policy orientations towards specific industries may differ. For instance, the Biden administration is less supportive of traditional energy, while the previous Trump administration held the opposite stance. These industrial policies can exert a certain level of intervention on the economy.

However, "the more important driving force of the economy lies in the fundamental vitality of the private sector. This foundation is determined by a combination of factors including the overall social and economic system, legal framework, cultural innovation atmosphere, and other elements, rather than areas directly influenced by the U.S. administrative system," said Hu Jie. At the same time, financial policies also play a significant role in economic influence. "However, this power belongs to the Federal Reserve, whose policy-making process is independent of the U.S. executive branch, as the law grants it independence. Although the president has the authority to nominate new candidates when the term of the Federal Reserve Chair ends, this procedure only occurs during the four-year replacement cycle," he pointed out. "The current Federal Reserve Chair, Powell, will not reach the end of his term until [year], so the new president's inauguration will not immediately impact the leadership of the Federal Reserve."

"In addition to the Chairman of the Federal Reserve, the seven members of the Federal Reserve Board are replaced every two years, with each replacement requiring presidential nomination and Senate approval. Furthermore, the operations of the regional Federal Reserve Banks are completely independent of presidential jurisdiction, and the executive branch has very limited direct intervention capabilities in financial policy," Hu Jie reminded. Currently, the market is indeed discussing who might succeed Powell. Some Fed watchers favor Dallas Fed President Logan (). However, some market participants believe that with different election outcomes, Fed Governor Waller () or the Chairman of the White House National Economic Council, former Fed Vice Chairman Brainard (), could also be potential candidates for the next Fed Chairman.

Hu Jie told reporters that the U.S. administration's impact on the economy is not significant. Fiscal and industrial policies may have slight differences, but the overall economic framework will not undergo significant changes due to a change in the presidency. "This situation is also reflected in the stock market; regardless of who is elected, the long-term impact on the market is not much different," he explained. It is worth noting that there is a certain misunderstanding among the American public about the power of the presidency. "Many people believe that the president has supreme power and can control all economic changes. For example, the current inflation issue is simplistically blamed on the Biden administration, which is actually unfair. The primary responsibility for inflation should lie with the Federal Reserve's monetary policy. Although the administration's fiscal policy may have some impact on inflation, these effects are relatively limited, and ordinary people find it difficult to deeply understand the subtle differences. Therefore, when economic difficulties arise, the public tends to shift their dissatisfaction onto the president."

However, it is noteworthy that Berkshire Hathaway, owned by the renowned American investor Warren Buffett, has released its third-quarter financial report for this year. The report shows that after reducing its stake in Apple Inc. by nearly % in the second quarter, the company further reduced its Apple shares by % in the third quarter. Meanwhile, the value of stocks purchased in the U.S. stock market was only $ billion. The financial report indicates that Berkshire Hathaway has been a net seller of stocks for eight consecutive quarters, while accumulating an unprecedented amount of cash in the investment world: as of the end of the third quarter, the company's total cash and cash equivalents reached $ billion, a record high.

Berkshire Hathaway's holding of substantial cash and cash equivalents has sparked thoughts on Warren Buffett's motives and investment prospects. Buffett once said that the mountain of liquid funds allows Berkshire Hathaway to have the ability to remedy crises. Hu Jie told the First Financial Daily that firstly, the upward cycle of the US stock market is usually directly related to the loose monetary policy of the US dollar. Taking the quantitative easing policy after the year as an example, although the US economy was in poor condition at that time, by releasing base currency, financial institutions obtained a large amount of cash flow, thus investing these funds into the stock market. This phenomenon drove the US stock market to rise from the year to the year. Currently, the Federal Reserve's monetary policy is shifting from tightening to easing, which is a positive factor for the stock market.

Second, the fundamental economic conditions in the United States remain robust. The International Monetary Fund (IMF) recently raised its growth forecast for the U.S. economy, anticipating growth of approximately .% this year, slightly above the healthy growth level of .%. Additionally, the unemployment rate is close to .%, below the natural rate of unemployment of .%, indicating relative stability in the labor market. On the inflation front, although it reached a high of .% two years ago, it has now largely receded to .%, with core inflation at .%. While still not meeting the Federal Reserve's % target, it has significantly improved. Overall, the current macroeconomic situation in the U.S. provides a favorable foundation for the stock market.

He stated that, however, the growth performance of the US stock market exhibits a phenomenon of "biased subject selection," primarily relying on a few tech giants, such as the "Seven Giants" ( ) companies that have attracted a large amount of capital, leading to a seemingly prosperous stock market performance that is actually limited to these leading companies. Concerns about the overvaluation of these companies' stock prices could trigger adjustment risks. From a technical perspective, if investors continue to chase these star stocks, they face higher risks. "From the overall valuation perspective, the price-to-earnings ratio of the US stock market is also relatively high. Many investors may feel that even holding good companies, the return rate at the current price is not ideal, and thus adopt a wait-and-see attitude."

He believes that Buffett's investment strategy has always focused on buying into good companies when their prices are low, but currently, the good companies he favors in the market are already expensive. Therefore, he is more inclined to hold onto cash and wait for the next round of price adjustments to have sufficient funds to enter the market. "For him, maintaining a cash reserve is a strategic choice, aimed at having funds available to quickly enter the market when it reaches a low point," Hu Jie said. "Therefore, there is no need to overinterpret Buffett's continuous selling actions; it is more like he is preparing for future market opportunities."