The US goes into election mode

This week the caucuses and primary elections to choose candidates for the US presidency begin. These are usually close fought on the challenger side, though often straightforward for an incumbent president seeking a second term. This year things are a bit different.

| 7 min read

True to the history of incumbents, President Biden does not face a popular challenge from a well know opponent. Marianne Williamson the first challenger is polling nationally around 6-8% compared to Biden’s 68-70%. Dean Phillips has also said he will run and is on around 3%. There are Democrats who think Biden’s age is a problem, seeking such a demanding four-year job when he has turned 82. Some in his own party are privately critical of his handling of various important issues in government. However, it looks as if he will sail through the primaries.

On the Republican side there has been a more vigorous challenge to Donald Trump from a variety of potential candidates. On the eve of the Iowa caucus the two front runners against Trump, Haley and De Santis, languish at around 12% each compared with 60% for the ex-President in the national polls. They may both do a bit better in Iowa and New Hampshire where Trump is at his weakest. Nikki Haley is on 20% for Iowa but still 28% behind Donald Trump.

We have now seen the last of the candidate debates, which Donald Trump refused to attend, choosing instead to hold his own meetings which often upstaged the candidate contest. There are Republicans who dislike Mr Trump or who want a different candidate without his history and baggage. However, because he has been so popular with many grass roots Republican voters and activists most of his challengers have been unwilling to be critical of him. It looks as if just as on the Democrat side so on the Republican side the primaries and caucuses will settle on the current front runner.

What could stop either candidate?

The Democrats set out plenty of hostile copy on Mr Trump and have waged their own war to try to stop him even running. They contend he was the instigator of the protests at the Capitol, and that his refusal to accept the result of the last election should disqualify him from seeking office again. Mr Trump has been able to turn this to his benefit with his Republican audience, claiming it is the Democrats who are anti-democratic seeking to prevent him putting his case to voters. He claims their charges that he broke the law are political attacks without legal merit.

The risk to our base case of a Trump versus Biden election could come from either of these elderly men developing some health impediment. We wish them both a healthy future, but at 82 for Biden and at 78 for Trump come the election day, there is more health risk. It is still possible the Democrat cases against Trump land a more lethal blow than to date, and it’s also possible something could emerge about Biden’s past or conduct in office that could cause difficulty, with many Republicans trying to find it.

The principles of democracy

There are three fundamentals to a democratic system that most in the West regard as crucial to avoiding tyranny and abusive state power under dictators or communist regimes.

  • The choice of who governs rests with the public in fair and free elections whose results are accepted by the politicians.
  • Everyone, including the government, are under the law.
  • The law is upheld through an independent police and prosecuting service, with neutral and independent judges

For this to work well the competing parties need to respect the system. They need to cede power when they lose an election, to sort out their disagreements in debates and votes, and not seek to politicise the police or judiciary. Some things are best left to political debate and elections and not dragged through the courts.


On both sides of the Atlantic in recent years democratic parties have sought to make more use of the law to further their disagreements with their opponents. Lawfare has become a more usual part of political life. In the USA taking to the courts against senior politicians is an extension of the now regular wish by both sides to impeach an opposing President rather than just attacking him politically to shift national opinion.

In Poland the new coalition government of Donald Tusk has arrested two former ministers of the rival party for offences in 2007 that were subsequently pardoned. The two are supported by the elected independent president who is in strong disagreement with his prime minister. In Spain, pro-independence elected Catalan politicians were sent to jail for running an unauthorised referendum. Pardons have now been issued to enable the prime minister to form a coalition government to stay in office. President Lula of Brazil was allowed to run again to be president after a spell in jail. Ex President Bolsonaro faces legal issues.

Markets have to get used to the fact that political parties are now using court cases to increasingly try to stop their rivals even running for office again, or to drive them out of office before the date of an election. Both sides can play this game. It adds a new uncertainty to forecasting results when the outcome of an election can be swayed in a court of law rather than just being settled in the court of public opinion. Opinion polls can guide us with the second but not with the first.

The US impact on markets

This year will see markets wobble over election news from the US, with many US market participants having their own views on who they want to win and what it might do if they did. Our job as investment advisers is to assess who is likely to win and what they might then do in office. It is still too early to make a firm call. Present polling says it is likely to be a Trump/Biden rerun and at the moment Trump has a narrow lead. Nearer the election we will set out more of the likely consequences of a Democrat or Republican win.

The two men agree about more than is commonly reported, favouring more growth, lower inflation, with more investment into and in the USA. They both regard China as their major competitor for business and for global influence. Both seek to avoid committing US military personnel to fighting overseas wars. Both are likely to want to borrow a lot, with Trump wanting lower taxes and Biden wanting higher spending. The biggest divide for business is over fossil fuel energy and the green transition, with Trump wanting to keep more of the fossil fuel activities and Biden wanting to accelerate the road to net zero.

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.

The US goes into election mode

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