| My last article posed the question; “Living through a Pandemic: Does Politics Matter ?” The answer I gave at that time was that Politics does matter and in this article I would like to discuss the potential economic implications of the outcome of the US Presidential Election more closely.
At time of writing we are still 14 days away from the Election and the polling continues to indicate a Biden win on the 3rd November. It would be naive however to totally discount the possibility of a Trump victory, as polling can be fickle and cannot identify those people who do not like to admit they will vote for Donald Trump. History clearly shows us however that it is rare for an incumbent to get re-elected on the back of high unemployment and significant financial hardship. This may be even more the case this year when you consider the scale of these factors at the time of this Election.
In the short-term, post-election, the new President will have to hit the ground running with action to address the economic damage continuing to be caused by Covid-19. More fiscal and monetary stimulus will be required to assist the economy, even assuming Nancy Pelosi and Steven Mnuchin are able to agree a deal to support the unemployed and businesses before election day.
In the event of a so called “Blue Wave”, where the Democrats gain control of the White House and Congress, President Biden would have the scope to push through a significantly larger stimulus package far more easily than if Congress was divided. This package would probably include labour market protections and a higher minimum wage to help address some of the inequality that has built up in the US. This re-balancing of financial inequality would in all probability lead to higher aggregate spending which would be a help to the economy. On the negative side these measures would impact corporate profitability in the short-term
Historically, a Republican victory has been good for business but this time things may be different. The policies that Trump and Biden have indicated they would progress, if elected, will be further down their to-do lists until the economy is underpinned with support and Covid-19 is brought under control.
Trump has been very vocal about his distrust of mail-in ballots being open to fraud. Many more American voters than ever before are choosing to cast their vote this way due to the risk of Covid-19. If Donald Trump refuses to concede the election result, if it goes against him, this could cause market volatility to be heightened for a period. Leading Republicans have already strongly indicated that there would be an “orderly transition” of power if Trump lost the election, just as there has been every 4 years since 1792. Time will tell how this story plays out but an inconclusive result could be harmful both economically and to stock markets in the short-term.
Overall then, the requirement to get the US economy working again and the necessity to get Covid-19 under control may blur the lines on what different approaches a Democrat and Republican President would have historically adopted to get the American economy moving.
As has been mentioned previously, Scott and I are available to assist you with specific queries so please make contact if required.
We hope you and your family continue to keep safe.
 Illustration of election 2020 in America threatened by a virus. |