Tammy Hall, Portfolio Manager, LGT Vestra US
Whilst this November's US Presidential election is set against the most unusual backdrop, 2016 taught us to expect anything when it comes to elections.
The story so far
Putting aside pandemic considerations, the Democratic nomination process was a debate over party direction and notable for the complete failure of one state's voting infrastructure. We have also witnessed interventions from billionaires – both of the financial services and music variety – in the form of late bids for the Democratic nomination and the Presidency itself. All of which makes the impeachment of the President in January seem like a distant memory.
Be wary of assumptions
Despite many polls writing off the incumbent President before campaigning begins in earnest, we should not expect the election to be a simple coronation for former Vice President Joe Biden. His choice of running mate will be key in a year where the divisions between progressive and moderate Democrats have been laid out like few others. In 2016, disaffected Sanders supporters in three key states switched allegiance to Donald Trump in sufficient numbers to deliver him both the relevant state and Presidency. In addition, both candidates will be around 80 years old by the end of the next term so there is a greater than usual chance that the Vice President may find themselves the resident of 1600 Pennsylvania Avenue. Expect to see both parties extolling the governing virtues of their Vice Presidential candidates. It must also be remembered that President Trump has a highly motivated and mobilised supporter base, who should be expected to turn out once again in 2020.
The impact of the pandemic
Any analysis of events in 2020 would be incomplete without a discussion of the pandemic. Public opinion towards universal healthcare in a Medicare-for-all type scenario has not changed and most voters appear to desire only incremental changes to the Affordable Care Act. There is some suggestion that Trump's handling of the pandemic may have lost him support amongst older voters – a key demographic for him and the Republican party – but it is too early to know for sure.
The economic legacy of this crisis will certainly be a key campaigning point, both in terms of the role and responsibilities of the Federal Reserve and the responsibility of the legislature to intervene in the economy. Unless Congress continues to provide stimulus packages, the economic impact of the shutdown of the economy will be making itself clear. We are already observing signals that the US recovery is stalling and unemployment is becoming a matter of permanent job losses rather than temporary and supported by furlough measures. Historically, any President experiencing economic recession in the final two years of their term lost the re-election.
Although wary of making predictions on the election outcome, we are aware of the policy implications of either party winning, with the caveat that some of this is dependent on the shape of Congress post-election.
Biden has promised to reverse the corporate tax cuts implemented by President Trump in 2017 and increase funding towards healthcare and renewable projects. We therefore see clear implications here for companies with high US domestic exposure. Given the complexities of the US healthcare system, we would characterise the impact of the Biden reforms as mixed.
A Trump re-election is likely to mean very little change in policy and it is notable that he has increased his commentary on healthcare pricing once again. Given the re-escalation of protectionist rhetoric, particularly with regard to China, we would predict an impact on companies with complex global supply chains.
Will history repeat?
In an already unpredictable year, the Presidential campaign trail promises to provide us with further twists. Financial markets and polls seem to indicate a victory for the Democrats, but we would caution that the same signals suggested a victory for the Democratic candidate in 2016, only to be proven dramatically wrong. In short, it is far too early to tell. Of course, should the Kanye West campaign gain momentum we will need to revisit all of this. Unlikely, granted, but in 2015 we said the same about a Presidential bid by a property developer from Manhattan…
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