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AIn international financial markets, an event is not expected as late in the year as the election of the US president on November 3. On Wednesday night, the two candidates Donald Trump and Joe Biden meet for the first time in one of the three great television duels.
And these three debates are already on the calendars of investment experts lining up with the meetings of the major central banks or the upcoming G20 summit. Germany’s largest fund company, DWS, talks about the biggest elections since 1980, when Ronald Reagan became president in Washington.
Many analysts at the big financial houses come to a similar conclusion: Both Biden and Trump would establish major economic programs after the election to revive the economy damaged by the crown. Trump is likely to push for tax cuts in particular. Joe Biden, on the other hand, has put increased public spending, funded by higher taxes for wealthy businesses and individuals, at the forefront of his campaign, as Alexander Buhrow of DZ-Bank sums up.
In the trade conflict with China, both candidates bet on difficulties. As president, Biden is likely to put pressure on China as well. After all, Biden has also failed to promise an urgent refund of punitive tariffs against Beijing. The Democrat is likely to rely more on cooperation with Western partners. Overall, Biden will be more conciliatory with Europe than Trump, says Buhrow.
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David Zahn of Franklin Templeton investment company sees two main uncertainties for the markets in a Biden presidency. “There are general concerns about tax increases, and the uncertainty surrounding future fiscal policy will be felt in markets around the world,” he says. “Deregulation is also a problem. There was a sharp increase in deregulation under Trump. If there are stricter rules, this could create obstacles for many companies. “
How much power does the president have?
However, from the perspective of the stock market, even more important than the question of who will be the new president is how complicated the political balance of power will be in Washington after November 3. Deutsche Bank chief economist David Folkerts-Landau warns that the election outcome may not yet be certain for the president’s planned inauguration on January 20, and that Americans could plunge into chaotic constitutional discussions by then.
Finally, it is becoming clear that large numbers of Americans wanted to cast their vote by mail. And Trump has already announced several times that he will not only accept good vote-by-mail results for Biden. From Folkerts-Landau’s point of view, only a very clear victory for one of the two candidates can avoid long discussions.
But the presidency itself is only part of the game; Another decisive factor for the real power of the first man of the state is who is in charge of Congress. “In our main scenario, we see a 60 percent chance that Biden will become president and a 42 percent chance that Democrats will win both the presidency and both houses of Congress,” writes DWS’s Johannes Müller. “This means that a divided government remains the most likely outcome from our point of view.” Other analysts see much lower odds of such a breakthrough.
The choice as a driver of the dollar exchange rate
From the point of view of the Swiss investment bank Credit Suisse, the distribution of power in Congress could have even greater consequences than the president’s decision. After all, both candidates have the goal of reviving the economy. But both could only do that if they also had the support of Congress.
A divided Washington will lead to stalemate, warns Deutsche Bank’s Folkerts-Landau. The outcome of the elections could be of particular importance for the further development of the dollar exchange rate. Deutsche Bank experts expect a euro-dollar exchange rate of 1.20 by the end of this year, and even 1.30 by the end of 2022. If Biden wins the election and can implement his economic stimulus program, he is heavily geared toward the poorest Americans, that could weaken the dollar even more quickly, according to Folkerts-Landau.
Beyond the noise of the election campaign
Regardless of the power of the new president, the clamor of the election campaign is one thing, but what ultimately translates into real politics is another. The economic situation should also force Biden to back away from demands such as a drastic increase in corporate tax or a doubling of the minimum wage, says DZ-Bank expert Buhrow. Even in today’s television debate, markets expect more clarity on the actual show than they do in the primaries.
