2020 US Presidential Election
With November 3rd now less than four months away, market participants are beginning to determine what the ramifications will be of either a Trump or Biden victory in the US Presidential Election and its impact on markets thereafter.

The global pandemic has taken centre stage and shifted the election narrative and the market is trying to determine what the best outcome would be given the very uncertain economic future that lies ahead, albeit that is being masked by the actions of the Fed, for the time being. Since Jerome Powell began dumping endless liquidity into the market and global rates being next to nil, equity markets continue to push back to 2020 highs and beyond. At the time of writing the NASDAQ is sitting close to all-time highs and the S&P 500 is positive on the year.

Trump may be mishandling the pandemic and that may result in a bigger and more protracted economic fallout, but overall, he’s seen as a win for markets – loose tax policies, less red tape, zero focus on corporate social responsibility.  Whereas there is real concern on Wall Street that Biden’s suggested corporate tax hikes from 21% to 28% would bring a 20% market correction and knock 10% off corporate earnings for 2021. (1)

For now, we’re comfortable that the market will continue to march to the tune of the Federal Reserve and optimism will remain that things are all going to be OK. However, as we get into the autumn we’ll start to have a better understanding of the economic damage and costs of the virus, the real impact its had on unemployment, as government support is reduced and layoffs become permanent. This economic reality may be enough for markets to turn south and neither election outcome would result in a material change of market sentiment.

Even though betting markets are beginning to point towards a strong Biden win with the mishandling of the Coronavirus and faltering economy, it’s important to note a few key points:

  1. Polling data, as we have seen with Brexit and the US Election is no longer a barometer of which way results will lead.
  2. The general view is that due to Biden’s connection with Obama he was the safest option out of a record number of Democrat nominees. Pitched against Trump many think he will falter once on the campaign trail is in full swing.
  3. Like many voters who prefer not to disclose their political allegiances during election season, the 2016 election showed that Trump voters are undercounted, and many will not openly admit to supporting the Republican candidate.
  4. Unless either candidate wins by a landslide, it is likely that the election day won’t be the day that we know the final outcome. With postal ballots taking days, if not weeks to count.

Trump vs Biden Betting Odds

Source: RealClearPolitics (2)

Looking Forward

Democratic National Convention: 17th August – 20th August
Milwaukee plays host to the Democratic National Convention where the Democrats are apparently rolling out a former Republican nominee from the 2016 race in former Ohio Governor John Kasich. His distaste for Trump being so strong he’s decided to switch allegiances in an attempt to replace his seat in the Oval Office.

Republican National Convention: 24th August – 27th August
These 3 days play host to the Republican National Convention which is scheduled to take place in Jacksonville, Florida after being relocated from Charlotte, North Carolina. There is large concern that Florida, although a Trump heartland is fast becoming the epicentre of the US coronavirus.

Presidential Debate One: 29th September
Hosted by The University of Notre Dame.

Presidential Debate Two: 15th October
Hosted by the University of Michigan.

Presidential Debate Three: 22nd October
Hosted by Belmont University in Nashville, Tennessee.

Election Day: 3rd November
As the election draws nearer, we’ll begin to dig into each candidates’ key policies and what the potential market impacts will be.

  1. Financial Times: https://www.ft.com/content/af5ee2c0-d53c-4437-8b98-5e8341ffbcf5

RealClearPolitics: https://www.realclearpolitics.com/elections/betting_odds/2020_president/

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