Back in January, despite four years of rancour, conflict, division, dissembling, and scattergun, on-the-hoof government Trump looked set for re-election, to the consternation of most of the global community. The economy was strong, unemployment at a 50-year low, he had been acquitted at the impeachment trial and his approval rating was at a three-year high. Then came COVID and a woeful and chaotic government response to the pandemic that has left the US wide open to continuing waves of infection as we are seeing in Texas, Florida and California. This was compounded by his seemingly callous and insensitive approach to race, social justice, and inequality following the most serious outbreak of civil unrest for 50 years. This would, you think, have by now reduced his re-election chances to around zero. As they say over the pond however, ‘this is America baby!’
Trump is arguably the most effective ‘populist’ politician of them all with an extraordinary ability to tap into the public mood to win votes. Trump claims everything as a personal triumph and has a Teflon like ability to escape censure from the public when things go wrong by using the simple tactic of blaming someone else instead, very loudly. This makes him very unpopular overseas but has until now always played very well to large sections of the home gallery. America First is a very popular policy in a very patriotic country which feels it has been the world’s policeman for far too long with far too little thanks. Similarly, his commitment to heavy-handed law and order plays far better to domestic rather than overseas sensibilities.
For nowthough, the polls and bookmakers, are pointing to a Biden win. Trump’s trump card, the economy, has collapsed and his shambolic handling of the pandemic is costing him the support, in his key constituency, of older voters. They see him prioritising re-opening the economy over their safety and in a wider sense see Biden as more moderate and more electable than Hilary Clinton or Bernie Sanders. Trump’s focus on strong law enforcement post the rioting, will play very well with his core support, but risks alienating the ‘floating voter’ independents and will likely mobilise black voters to get out and vote. The logistics of the first Covid election may be a wildcard with far more ‘mail in’ (postal) voting and social distancing possibly affecting turnout on the day. It could also mean several days before the result is known and plenty of scope for allegations of dirty work at the crossroads being made by the loser.
Biden is running a conservative, safety first campaign, avoiding gaffes, and will likely choose a safety-first female running mate for Vice-President. He is playing the competent statesman, rather hoping Trump continues to blow himself up. In this respect, the low key, largely screen based campaign race should play into his hands. Democrats have learnt from their complacency in 2016 and will turn out in droves to vote in November. Trump revels in the dirty fight and the vicious soundbite and will be looking to ‘go negative’. This is far less likely to succeed with the amiable Biden than it did with the divisive and unpopular Hilary who was carrying shedloads of baggage into the last election. I don’t think we’ll be hearing too much ‘lock him up’ this time around.
The US has an unusual ‘electoral college’ system whereby votes are tallied at a state level and the winner in each state earns the votes for the entire state. This worked well for Trump in 2016 when he lost the popular vote by over 3 million votes while winning the Electoral College, thanks to razor-thin victories by margins of less than 1 percentage point in crucial swing states like Michigan, Wisconsin, and Pennsylvania. This time though, the polls are not looking so promising, polling currently has Biden ahead in these States along with Arizona, North Carolina and Florida, other key swing States Trump won in 2016. There are also seats up for grabs in the House of Representatives (currently with a Democrat majority) and Senate (currently in Republican hands). The current sense is a Democrat sweep of both Houses, which would make Trump’s job even more difficult if the voters give him the keys to the White House for a second time. A split Congress, as now, would be an obstacle for whoever wins.
We know all about Trump, but the question for the financial markets is what a Biden Presidency would look like and, as yet, this isn’t totally clear. First of all, he needs to choose a running mate, not least because at 77 years of age the VP may play a bigger role than usual and would be in pole position for the next election should Biden serve just one term. Biden has already pledged that his running mate will be a woman and is currently considering a racially diverse selection of candidates. Kamala Harris, the former Senator and California Attorney General has gravitas, experience and voter appeal and is the obvious candidate. There are a host of other contenders, virtually all of which fall into the ‘safe’ category, in line with Biden’s conservative campaign. The most problematic pick for the markets would likely be Elizabeth Warren from the more progressive left-wing of the party and perceived to have a strong anti-big business stance.
It is worth remembering that Biden was VP to Obama and policy is likely to follow a similar course, though the party has moved more to the left in recent years so this will need to be reflected in the major issues. The pandemic has given Biden the opportunity to present himself as a candidate of experience and competence who can come up with solutions to structural issues that have suddenly become more pressing in healthcare, financial security for the low income, immigration and the environment. He needs to keep the more radical side of his party on board, so will borrow some policies from Warren and Sanders though not the breaking up of big-tech and steep rises in corporate taxes that they were advocating on the campaign trail. So, while making accommodations to the left, he is most unlikely to be going the whole hog and adopting Medicare for All or the Green New Deal.
Much will depend if the Democrats seize power in the Senate in which case we could see policies which significantly improve the living standards for those on low incomes with a higher minimum wage and big new federal investments in healthcare and education alongside large strides forward in reducing American carbon dioxide emissions and investment in clean energy technologies. This sounds radical but campaign policies have a way of being diluted in government. Will this scare financial markets unduly? Probably not, not least because a Biden Presidency is already starting to be factored into stock markets. Trump may be capitalism personified but is not necessarily quite the godsend for markets this would imply. His erratic policymaking and hard-line trade policies have upset markets on occasion during his Presidency and will no doubt do so again if re-elected.
The bookies currently have Biden at 8/11 and Trump at 5/4. There’s still a long way to go and Trump revels in his ‘comeback’ stories, he’ll need another in November.