The stock market and economic conditions, in general, have been improving throughout 2024. And investors both here in the UK and in the US have enjoyed a fairly significant market rally. However, warnings of an upcoming stock market crash seem to be on the rise.
Stock valuations in the UK look fairly reasonable. But in America, plenty of growth stocks have once again started trading at a premium based on expectations of rebounding growth in 2025 and beyond. And with a presidential election just around the corner, uncertainty over fiscal policy’s starting to heat up.
Harris vs Trump
As usual, with the political landscape heating up, notable investors from Wall Street have started sharing their opinions of what the election outcome means for the stock market.
One voice that’s getting a lot of attention is that of John Paulson. He’s built quite a reputation after successfully predicting and profiting from the 2008 financial crisis, earning some of the biggest returns in Wall Street history – approximately $15bn.
As such, his word carries a lot of weight. So it’s no surprise that concerns are rising after he announced a stock market crash could occur if Kamala Harris wins in November. Digging into the details, his prediction’s based on proposed legislation to introduce higher corporation tax and new taxes on unrealised capital gains.
Neither proposals are investor-friendly. And he’s worried that they may trigger a massive sell-off across various asset classes, including real estate and stocks, leading to a market crash and potentially a recession.
Needless to say, that’s quite alarming. The problem is there are similar forecasts for a Trump victory. Goldman Sachs has released its own set of forecasts indicating that Trump’s plans to increase international trade tariffs could trigger a massive spike in US product prices, leading to a recession.
So which predictions should investors believe?
Will the stock market crash?
Personally, I wouldn’t be worried about a looming collapse of stock prices, at least not from the upcoming election. Fears of catastrophe are pretty common in the US every time a presidential election takes place. Yet most of the time, these concerns never actually materialise.
But let’s assume the worst and say a crash is coming regardless of the outcome in November. What can investors do?
Businesses operating within defensive industries are typically less impacted by political and economic decisions. After all, demand for sectors like healthcare, utilities, and consumer staples often continue to chug along nicely regardless of who’s in power. And that makes shares of Intuitive Surgical (NASDAQ:ISRG) quite enticing.
The business is the global leader in robot-assisted surgical machines with its da Vinci technology deployed worldwide. As a less intrusive surgical option, patient risk and recovery times are significantly reduced. And since Intuitive Surgical makes most of its money from selling consumables such as scalpels for its machines, it’s proven to be a highly cash-generative enterprise that’s translated into impressive share price performance.
The firm’s growth largely depends on health insurance companies providing coverage for robotic surgeries. And since it’s currently still more expensive than traditional surgery, coverage isn’t always easy to come by, creating hurdles. But while this adoption risk can’t be ignored, the long-term growth potential of this market makes it well worth considering, in my opinion.
