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16.10.20

The US Election – Part II

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The US Presidential election takes place on Tuesday November 3rd. Joe Biden continues to retain a significant poll lead and our analysis of the betting odds shows Biden increasing his probability of victory as the election date approaches.

In our second part of 3 scenarios we look at a Trump win – but loses Senate.

Trump Wins – given where polls are, this seems the least likely of our three scenarios.

The market knows what to expect from President Donald Trump; business-friendly policies, less regulation, tax cuts, tariffs on imports – these are the forces that have helped define the Trump stock market.

Prior to Covid-19, the level of the stock market was Trump’s key calling card in terms of how he rated his economic performance. Whilst initially dubious, (remember the big fall in S&P Futures as the 2016 result unfolded) the market has learned to live with Trump, even his tweets against the Fed and the Chinese.

A Trump victory would mean a continuation of these business-friendly policies and the likely loss of the Senate to the Democrats may even temper some of Trump’s more unusual policy suggestions. The latter may be a double-edged sword. If the Democrats take the Senate but lose the election (particularly if the result is close or disputed), there will be an enormous amount of bad blood between the President and Congress. Not only will bi-partisan politics be impossible (unlike Reagan in the 1980’s and Clinton in the 1990’s), but Congress could then go on the offensive in terms of impeachment, debt ceiling approvals etc, which would be bad for market sentiment as Congress and the White House would be engaged in a war of attrition.

Chris Salacinski
Director & Financial Planner

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