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The US Presidential election remains an uncertainty for markets

The US presidential elections take place on November 3 and Donald Trump is now closing the gap in the polls with Joe Biden. The result remains too close to call.

The US Presidential elections take place on November 3 and Donald Trump is now closing the gap in the polls with Joe Biden. The result remains too close to call.

Charles Stanley

in Features


The US election is now Democrat candidate Joe Biden's to lose. Donald Trump's grand strategy has been badly damaged by the virus. His plan was to heat up the US economy, report a full term of growth, remind people of how many new jobs had been created and point to the boost in take-home pay. Real wages were rising, taxes had been cut, and many Americans were beginning to experience better times as the pandemic hit.

The decisions taken in many states to lockdown the economy to reduce the spread of the virus transformed all that overnight. Donald Trump was destined to preside over the biggest fall in US output, employment and incomes seen since the 1930s. Unemployment has surged to high levels, whilst the country struggles to get back to something like normal.

Resilient polling

You might expect in these circumstances that Mr Trump's poll ratings would be languishing badly. Instead, he sits today around 6% behind Joe Biden. This is not that much worse than his position against Hillary Clinton for much of their campaign in 2016. He experienced something of a swing to him, as many governments did abroad as the pandemic struck. People turned to those in office and looked to them for guidance and good government. Mr Trump, like those other administrations, had the ear of the public, as they were desperate for Covid-19 news.

The President got less out of this than some governments elsewhere, partly because he was equivocal in his handling of the disease. Seeing the damage that a strong response the virus could do to the economy, he tried to ignore it and avoid the dangerous lockdowns that other countries adopted. His hand was forced by events and by Democrat Governors in around half the states of the Union, who used their considerable powers to lockdown anyway.

More recently, Mr Trump has sought to create a Republican way of handling Covid-19 that avoids lockdown. The latest iteration is the Arizona model, where with a Republican Governor, it has kept shops and places of worship open and claim better use of indoor dining and hospitality facilities. He seeks to draw a distinction between Republicans trying to support jobs and keep things open, and Democrats using rules and guidance to close businesses down.

Some voters are persuaded, but some of his elderly voters from 2016 are scared of the virus and worried by his more laissez-faire approach. If an incumbent government wishes to enjoy continuing support from the Covid-19 crisis, it needs to put out a consistent and convincing message and show the virus coming under control. Mr Trump is finding this difficult to do, with further flare-ups in various states.

The President seems happiest returning to his central planned agenda about jobs, incomes and growth. He is putting through a series of measures to show he is on the side of working people against the unfair practices of foreigners. He has recently signed an Executive Order to stop US workers being replaced by foreign workers or contractors in federal contracts. He has published an Executive Order to increase ‘made in America’ through instruction to purchase from home to US government Agencies. He has toughened his stance about Chinese technology, seeking to force the Chinese owners of TikTok and TenCent to sell off their US arms to American buyers. He is setting out a digital divide and creating more business opportunities for US tech companies by pressurising allies. As his Trade Representative said, they will "fight the battle against the invisible enemy from China".

Sleepy Joe

Joe Biden is offering a more relaxed campaign. His website’s latest posting is over a week old, though he is more active on twitter. He runs on the slogan "Build back better" as he "battles for the soul of the nation". He comments regularly on racial equality matters and on the rights of migrants, challenging Trump's tougher line. He wants to pursue a strong Green agenda which has its hazards in oil, gas and car country, and substantially higher taxes, which worries many. His appeal is to liberals who want to cast aside Mr Trump's hostile approach to international bodies, treaties and foreigners in general. He champions the usual Democrat causes of women's rights, pro-abortion, more socialised medicine and more government intervention for minorities.

Both candidates are playing to their base vote rather than trimming to the centre. US elections have lower turnouts than national government elections in Europe, so candidates do feel they need to offer enough partisan material to mobilise their core support.  The US has been split roughly 50/50 between the two sides for many years. In 2016 Trump won with a minority of the popular vote thanks to doing well in some former Democrat industrial areas which felt ignored by the new liberal Democrats of the big cities of the east and west coasts. Today Mr Trump is only ahead in a minority of the swing states in the polls but is battling hard to win enough back.

Mr Trump still outpolls Mr Biden on the economy and is still determined to make this an election about the economy. He wants voters to forget the sharp recession, remember the achievements on jobs and incomes up to February, and entice them with the promise of more to come. He wants the government to pay everyone unemployed $400 a week and to keep up the fast pace of new job creation of recent months after the low.

Mr Biden will seek to inspire more people with a vision of an internationally-engaged super green government, offering moral superiority after the Trump years. It is still unclear who will win, as both candidates can mobilise important sections of opinion at the same time as alienating others in what is a very divided society.

Mr Trump needs to combat the economic letdown and the perception that he has neither gripped Covid-19 hard enough nor protected the economy from it enough. Joe Biden needs to combat the idea that he is too old for the job, that he is indeed Sleepy Joe as Mr Trump says, and that his values of Green revolution and internationalism are not the values of much of middle America. Mr Biden's offer on trade and international collaboration will go down better with markets than Mr Trump's trade wars. His higher taxes may tip the markets down on balance, as they will have a direct effect in making shares less valuable and savers worse off.  Both are broadly helpful to US technology, and Mr Biden will boost green investments.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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