The US presidential race may be tighter than many think. Let’s survey diverse perspectives on the race, its issues, and its market implications, starting with Nate Silver’s August 16 analysis at FiveThirtyEight.
1. Nate Silver explains his thesis, that a Trump win cannot be counted out:
“While the polls have been stable so far this year, it’s still only August. The debates and the conventions have yet to occur. Biden only named his running mate yesterday. And the campaign is being conducted amidst a pandemic the likes of which the United States has not seen in more than 100 years, which is also causing an unprecedented and volatile economy.
“Nor has it been that uncommon, historically, for polls to shift fairly radically from mid-August until Election Day. Furthermore, there are some reasons to think the election will tighten, and President Trump is likely to have an advantage in a close election because of the Electoral College.” (“It’s Way Too Soon To Count Trump Out,” https://fivethirtyeight.com/features/its-way-too-soon-to-count-trump-out/)
2. Here is the link to Predictit: https://www.predictit.org/, where the markets bet on all sorts of outcomes. (See https://www.predictit.org/support/what-is-predictit to learn how this works.) At their worst, Trump’s odds of reelection were down to 38% according to Predictit; as I write, Predictit has his odds at 43%. Readers can check the odds as this numeric changes frequently.
3. The Economist has a political outcome predictive model. Here’s the link: “Forecasting the US elections,” https://projects.economist.com/us-2020-forecast/president.
4. Let’s turn to the candidates on China. We’ve been asked about Kamala Harris’ views on China. Here’s a link that spells those out: “China Policy Profile: Vice Presidential Nominee Kamala Harris,” https://uscnpm.org/2019/10/23/china-policy-profiles-senator-kamala-harris/. Trump and Pence have been strongly critical of China. Biden has, too, for that matter; but here’s the 57-page political memo that outlines the politics of the Republicans’ China-bashing strategy for managing public perceptions of the pandemic: “Corona Big Book: Main Messages,” https://static.politico.com/80/54/2f3219384e01833b0a0ddf95181c/corona-virus-big-book-4.17.20.pdf.
5. On taxes, the candidates are polar opposites. Biden/Harris have stated they will support increases in corporate and some individual taxation. Trump/Pence propose more tax cuts. There are hundreds of citations to support this, so we won’t take time to list them here.
6. On climate change, the candidates are also opposites. Biden/Harris have an extensive proposal that includes spending numbers and program descriptions. See for details “The Biden Plan to Secure Environmental Justice and Equitable Economic Opportunity in a Clean Energy Future,” https://joebiden.com/climate-plan/. Trump/Pence have a history of diminishing activity and withdrawal from global climate initiatives. See “Energy And Environment:
President Donald J. Trump Achievements,” https://www.promiseskept.com/achievement/overview/energy-and-environment/#.
7. Here’s Capital Economics’ view on the election and stock market implications. We thank them for giving us permission to share it with readers in PDF format. “Global Markets Focus: Victory for the Democrats could hold back US equities,” https://research.cdn-1.capitaleconomics.com/ad3957/victory-for-the-democrats-could-hold-back-us-equities.pdf.
8. “Money is the mother’s milk of politics,” as California’s Jesse Unruh said (https://en.wikipedia.org/wiki/Jesse_M._Unruh). Politico recently reported that the money race has become close to a dead heat. “Biden in recent months has nearly closed the once-yawning cash gap between him and President Donald Trump. In July, Trump’s campaign still had more cash on hand at $300 million, compared with Biden’s $294 million.”
In the details of their report, Politico noted this key element: “Biden has a significant fundraising advantage over Trump from people affiliated with the country’s six largest banks: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley, Politico’s Zachary Warmbrodt reports. The contributions total $907,216 for Biden and $293,434 for Trump. The preference for the former vice president comes even as the financial sector benefited from Republicans’ 40 percent cut to the corporate tax rate, and Biden promises to repeal some of those tax cuts and impose new fees on large financial institutions.” (“They saw record profits under Trump. Bankers are backing Biden anyway,” https://www.politico.com/news/2020/08/11/bankers-back-biden-trump-393297)
9. Here’s an American Banker piece: “What Trump’s reelection would mean for banks,” https://www.americanbanker.com/news/what-trumps-reelection-would-mean-for-banks. One takeaway – “A second-term Trump administration would likely continue its deregulatory efforts, focus on Fannie Mae and Freddie Mac’s exit from conservatorship, and seek to facilitate fintech participation in the banking system.”
10. There is a huge amount of opinion literature on the pro and the con side about Trump. Pro-Trump media opinions are found in many conservative media outlets. The Fox News evening lineup offers among the strongest pro-Trump messaging. Carlson, Hannity, and Ingraham lead that discussion. We see the opposite on CNN, with Cooper, Cuomo, and Lemon. The Trump policy argument is focused on repeating numbers on testing and on reciting the history of Trump’s leadership against the virus by closing down China flights and ramping up PPE and Operation Warp Speed on vaccine development and distribution. Supporters of Trump argue robustly in favor of his “leadership.” They emphasize his views on “law and order” and on making America great by reversing the policies of earlier presidents.
Here, on the other hand, is a scathing criticism of Trump and the situation in America more broadly. It was sent to me by a prominent personality in the financial services industry. He wrote, “I am sharing this disturbing article with a wide list of recipients, some of whom do not share my political inclinations. I think this is a profound opinion piece by a Canadian academic that cites a lot of empirical evidence. It connects many of the dots that we have observed. You won’t find this type of writing in the NYT or the NYer.” “The Unraveling of America,” by anthropologist Wade Davis, can be found at this link: https://www.rollingstone.com/politics/political-commentary/covid-19-end-of-american-era-wade-davis-1038206/.
11. Here’s a Wall Street Journal opinion piece: “Get Ready for the Biden Stock Boom. Expect some turbulence, but 15% annual returns are possible even with the threat of higher taxes.” https://apple.news/ABzkjE1RzQoWakngJkXO0Zg
12. Here’s Trump supporter and famous investor Jeff Gundlach, who called the Trump victory in 2016: “Gundlach Says Trump Will Win, Calls Harris Too Charismatic,” https://www.bloomberg.com/news/articles/2020-08-11/gundlach-says-trump-will-win-calls-harris-too-charismatic.
13. In his “Frank Talk” blog, CEO Frank Holmes looks at historical correlations between the markets and election outcomes and considers the investment implications of a potential Biden presidency: “Markets Have Outperformed When a President Seeks Reelection,” http://www.usfunds.com/investor-library/frank-talk/markets-have-outperformed-when-a-president-seeks-reelection/#.Xzbpyi3Mw_U.
14. AIER President Edward Peter Stringham considers the competing claims of public health and personal liberty that have been so central to US pandemic politics and outcomes – and key to this year’s campaigns – citing the remarks of former Supreme Court of the United Kingdom judge Lord Sumption: “Lord Sumption: The Lockdown Is Without Doubt the Greatest Interference with Personal Liberty in Our History,” https://www.aier.org/article/lord-sumption-the-lockdown-is-without-doubt-the-greatest-interference-with-personal-liberty-in-our-history/.
15. And, finally, there is the history lesson about election surprises. Truman won reelection when polls said Dewey was to win (“It’s happened before: Truman’s defeat of Dewey had hints of Trump-Clinton,” https://www.chicagotribune.com/opinion/commentary/ct-truman-defeats-dewey-1948-flashback-perspec-1113-md-20161111-story.html?outputType=amp).
For markets and for investors and for businesses, it is still a long way until November. We think this election is currently closer than many folks believe. Stay tuned.
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