11 November 2020
As of Monday 9th November Biden has been named as the president-elect… but what does that mean for markets and investors?
The economic agenda wasn’t a major talking point in the campaigns, and Biden is known as a pragmatic centrist without a single strong driving vision behind the agenda.
Still, we can start by contrasting key elements of Bidenomics with Trumpenomics:
- Covid-19 response
- Racial equity
- Green new deal
- Higher taxes (large companies and higher-earners)
- Stimulus borrowing?
- Lower trade deficits / trade wars
- Lower taxes
- Less regulation
- More investment / growth
So on the face of it, It looks like government will be divided, with the senate under Republican control (pending two run-off contests in Georgia in January) , so what can the president do?
- Executive orders (eg environmental regulation – could roll back a lot of Trump’s de-regulation)
- Likely key cabinet appointees: treasury secretary, FED, DoJ. With a Republican controlled senate these are likely to be more centrist than they may have been otherwise
The treasury secretary position has always been occupied by a white man, this looks likely to change.
Markets seem to have taken the “bull case”, with a large risk-on rally since the election day – narrative seems to be around the divided government restricting the Democrats’ agenda being positive for markets by keeping interest rates low and reducing the chance of antitrust regulation in tech.
Illustrates the difficulty in trying to trade around political events- often if you know the outcome in advance you still wouldn’t get the right market positioning.
But there is also a bear case: Trump as the new leader of a noisy and obstructive opposition. Lots more politics to go in next few years with Senate and house seats up for grabs within two years.
Trade is a key issue as this was a key part of the Trump agenda over the last 4 years, which considered trade deficits to be a sign of bad deal making to be negotiated away, resulting in the trade war, tariffs and subsequent agreements with China.
The end of tariffs, and perhaps more importantly, the end of the threat of tariffs, is likely to be positive for exporting countries, particularly emerging markets. As well as a more predictable and stable foreign policy generally.
One thing to take away
There is more uncertainty than usual around central economic scenarios, although narrowing a little, and outlook getting slightly better. The main message is how strong all the supportive policy has been – this isn’t likely to change and underpins the outlook for the global economy.
Most over-appreciated thing
- Political polls. These were wrong (again) but quite a large margin, signalling how difficult it is
- How difficult it is to actually take a view on elections and trade on the back of of it
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