Updated: Oct 31
Why should I care? I get this question a lot when speaking about politics, when analysing the financial markets and talking about macroeconomics the politics of an economy are often over looked. This is baffling to me as the people that run the economy shape its sentiment with their policy, it MUST not be overlooked as even before looking at any figures this information can give you a great idea of what you might find …
“Chaotic and Bitter”, “The Trump-Biden cat fight”, "The fight club sequel”. These are just a few of the ways in which professional political correspondents chose to describe one of the most incredible and quite frankly, exciting presidential debates the US has ever seen, both Trump and Biden came out swinging for each other with little regard for the rules of the debate, some political commentators even jokingly remarked that Chris Wallace, the moderator, would need therapy after that.
The nature of this debate is ironic as it reflects how world politics is at the moment, and can be described as a series of unprecedented and unpredictable events as we enter a new environment of pre-pandemic politics.
More recently we saw the first and only Vice-presidential debate, this event was a much more, dare I say ‘presidential’ exchange between two very experienced members of Government. This debate holds heavy significance however, not just due to Kamila Harris potential becoming the first black and female vice president but due to the age of their bosses (Trump 74 and Biden 78) one of these two could very feasibly become president one day, especially if the Trump COVID saga continues.
When looking at the potential economic sentiment of a country, the people in charge become very important as it is their ideas that will shape the way that the country moves in the markets for at least 4 years. Here we will look at the key policy agendas of Trump and Biden.
A former philanthropist himself Trump has always bragged about his connections and stature in the world of big American business and he loves to keep his “Wall street buddies” happy. One of his flagship economic moves was to cut corporate tax and increase tax breaks for not just the American people but also for financial institutions such as hedge funds and Banks.
Trump says this will create jobs by encouraging these companies to develop and expand into different parts of America and not focus on buying materials or for searching for potential customers outside the US. In fact, while there is evidence that the average American household has saved around $2,000 dollars a year in tax breaks this move has created a deficit in the Federal reserve and for all you LITA traders out there, we all know this is a key driver in our ‘LogikStrategy’ analysis.
Trumps trade war with China is something that all LITA traders are familiar with, imposing huge tariffs on Chinese goods has not done what trump had hoped, although it has made Chinese made products more expensive and therefore, less attractive, it has also strangled his farmers balance sheets as American machinery is still too expensive, and it has also not helped his manufacturing industry which was one of his main attractions whilst running for the first time back in 2016.
Controversy has surrounded Biden concerning his affiliation with the ‘Green new deal’ that was put before the American congress last year. He has repeatedly stated that he does not support that bill but he supports his own version (not to dissimilar) of the GND. Although we cannot know what aspects of the ‘Biden deal’ are different we do know the parts that he supports.
In my opinion this is a political play from Biden, the democratic party and its voters have been almost militant supporters of this new deal so it would make sense for him to support this, however, Biden needs to turn the battleground states of Florida and Pennsylvania where the GND is extremely controversial, this is why I think Biden has chose to come up with his own deal to distance himself from that agenda.
Biden wants to invest in the green energy sector, clean and renewable energy, more sustainable infrastructure and state funded healthcare. Even though these topics seem like common sense to most people outside the US, you have to understand that this issue is polarizing for the US and their fundamentals are different.
America has always been in support of the free market, a lot of people view Bidens deal as him trying to impose himself on their liberty, the policy would hurt the energy and fossil fuels sectors of the American economy which hold a huge share of the political influence in America, his deal is said to potentially create 7,000,000 new jobs for America in new industries and fields of manufacturing, the question is, do the American people believe him?
Biden has also stated that he wants to get rid of the trump tax cuts and he even wants to raise taxes on people earning over $400,000 a year to help pay for his new policy ideas such as the Biden deal and the move from fossil fuels to renewable energy. Note that this is not Biden trying to cover the deficit, he is just moving the money to a different area of infrastructure.
As of the 7th of October, a poll was released by the Quinnipiac university where they surveyed the key battleground states that separate Trump and Biden; Florida, Pennsylvania and Iowa. The results were as follows:
· FLORIDA: Biden 51%, Trump 40%
· PENNSYLVANIA: Biden 54%, Trump 41%
· IOWA: Biden 50%, Trump 45%
The link to the full poll report: https://poll.qu.edu/florida/release-detail?ReleaseID=3678
The poll clearly shows a Biden lead in all key battleground states and even though we still have a month until election day the leads are considered by a lot of political commentators to be damning for Trump, but as we saw with the 2016 election only time will tell.
What does a win for either candidate mean for America, and more importantly the Economic drivers?
Continue the tax cuts for high income earners, increasing the deficit. More public spending on green infrastructure and other environmental initiatives.
Continue his hard-line trade policy, he does not want to be “bullied by China”.
Continue his push for more oil and coal deposits to be found and mined in the US.
Scrap Obamacare which provides state funded healthcare to 20 million US citizens and replace it with his own version – decreases public spending.
The ‘Biden deal’ likely to create 7,000,0000 more jobs if he passes it in congress – higher GDP growth.
Will enter back into the Paris climate accord that trump pulled out of.
Trying to phase out big US fossil fuel companies and go net 0 emissions by 2050.
A Trump win vs the Forex markets
Trump won the elections on Jan 20th 2017, an example of the potential impacts of this victory could be seen in the overall impact of the exchange rate on USDJPY.
USD in comparison to JPY fell substantially over the past 3.5 years, 11% to be exact. Could this have been mainly due to the policies in place by trump? A weaker USD makes the U.S. a global player in exports helping domestic businesses. It does however hurt importers of goods as the base currency is weaker but overall it has been an inflationary pressure on the US.
If trump were to win again, this trend may continue and actually align with the USDJPY idea we have in the trade idea section.
If Biden wins, we may see the opposite happen who knows.
This choice between two very old and conservative candidates is turning out to be one of the most fascinating presidential races of the 21st century. Although fairly liberal with their language on the debate stage, both men have set out very conservative economic plans for their country, so who is better for who?
A 2nd term of Trump will be a massive win for the big financial institutions (excluding the federal reserve) and the oil and gas industry as Trump is all for de-regulation and giving his buddies a helping hand. Biden is a big win for US international relations and cooperation within the US Government itself, a former diplomat and Vice President he is highly respected on the international scene, his environmental initiatives will have activists around the country licking their lips as I’m sure they will be getting a lot of very much wanted attention.
Finally, neither I or anyone else can tell you which way this is going to go, think back to 2016, Clinton for the win right? If anyone tells you they know the winner of this race, the are lying.