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There is one scenario in particular that stands out as the worst in the US presidential election.
On November 3, the American people will decide who will be the 46th president of the United States. Chief Economist Harald Magnus Andreassen of SpareBank 1 Markets has no doubts about what is worse for the stock market when Americans go to the polls.
– The worst case scenario is a controversial election, where it says how to count the votes in some states and ends in a legal process.
– Not very likely, but not entirely unthinkable, although it was more likely three months ago, Andreassen tells Nettavisen Økonomi.
In polls, Joe Biden clearly leads Trump, and he’s way ahead of what Hilary Clinton did before the 2016 election. Biden’s chances of victory.
Also read: This is a big mistake by Donald Trump
Violence
But Andreassen believes there is still a significant risk of a controversial election in today’s politicized America. The biggest uncertainty is whether Republicans will accept an electoral defeat and whether the right will stop counting and prevent votes from being counted.
– The worst case scenario is that the Republican majority in the Supreme Court accepts that the count will end, so Trump has won, says Andreassen. He fears that such a political decision could unleash great social unrest and, in the worst case, conditions similar to a civil war.
Andreassen believes that if we achieve a Supreme Court divided along party lines, it is difficult to see how American society can calm down. It can end in violence and large demonstrations.
– But if there is a clear winner in the elections, that’s fine. Many people are happy with tax breaks for the wealthy and businesses and fewer regulations, but there will also be lower standards for employees.
– Those who wait for Biden, gather more information on support measures to reactivate the economy, with large public investments.
mate
Andreassen says a lot will depend on who gets the majority in the Senate. There could be a complete rift if Biden becomes president, while the Republicans retain power in the Senate.
– Then the system is put to the test and it becomes difficult to make decisions because the Senate can block many decisions. A political system that doesn’t make too many decisions can be good, because then fewer stupid decisions are made. But right now, decisions should be made quickly enough due to the crisis in the crown, says the chief economist.
A contentious issue is the approval of postal ballots, which have a completely different position and reputation from Norway. So far, more than 10 million Americans have voted in advance and there will be more. Andreassen says postal votes in the United States have a long and strange history.
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Electoral fraud
– Trump has realized that these votes involve electoral fraud, but it has never been proven. There are many states that only have votes by mail, but create a challenge now that the new states will offer votes by mail without having the proper systems. They’ve messed with the lists, Andreassen says.
Trump has said that voting by mail is a definition of voter fraud, but no one supports him on that.
– Many have investigated voter fraud in the United States, but there has been no electoral fraud. On the other hand, many have been prevented from voting, Andreassen notes.
And as if that wasn’t enough, Trump installed a good acquaintance and donor as head of the Post Office to prevent voters from casting their ballots.
YOU HAVE A CLEAR FAVORITE: Chief Economist Harald Magnus Andreassen at SpareBank 1 Markets.
Photo: Lise Åserud (NTB scanpix)
Deliberate hindrance
This happened by not allocating enough money to avoid the ability to handle early voting, which Andreassen believes is “remarkable.”
– There are several Democrats who vote by mail, and Trump has been open about that if everyone who can vote gets a vote, then we lose. In Norway, we have the National Register so you can vote easily, and we don’t think this is a problem, he says.
– Republicans, on the other hand, have a long tradition of preventing people who do not want to vote for them from voting. The Council of Europe has said that the United States does not have a system to keep people in order.
History shows that it is especially immigrants, minorities, and young people who use early voting, and traditionally vote Democrats.
Noisy
– There is a lot of chaos around Republicans using early votes to keep voting against, and they have been open about it. They even put their own people in front of the polls who glare at you and act loud if they think you’re voting for Democrats.
Andreassen says he believes that is not possible, but he says something about the level of conflict in the United States. The conflicts date back to the days of slavery and are much bigger and deeper than we are used to in Norway.
Thus, Democrats are more likely to accept electoral defeat if they are convinced that early votes have been counted correctly.
Also read: Nordea experts reject that Trump is the best for the stock market
Damned
– No Democrat has said anything about it, but in the 2000 election between George Bush and Al Gore, the Supreme Court stopped counting the votes. Later, the Democrats accepted George Bush, even though the result was still debatable, Andreassen says, continuing:
– If the Supreme Court steps in now and stops the vote counting, I think the Democrats will be cursed. A Supreme Court of the United States with intermediate political dividing lines will be a “python” for the markets
However, Andreassen will not exaggerate the long-term effects of electoral chaos. He points out that the United States has been through all kinds of events, such as the Cuban crisis, wars, and September 11. The latter had some impact, but Andreassen does not believe that electoral chaos will affect the economy in the long term.
– No, an uncertainty does not have to affect the stock market, it takes a lot to surprise investors. In market terms, the corona pandemic is more important, he says.
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The economy decides
The chief economist, therefore, does not believe that whoever wins the election will be decisive for the stock market, he believes that we should not exaggerate. Spectacular events get a lot of attention, but you won’t find them again on long-haul charts. The long-term deciding factor is whether the economy is doing well or not.
– What can happen in the currency and interest rate markets?
– I suppose a conflict can drive down long-term interest rates, as can a division between the president and Congress. If Biden wins, longs can go up. Then there will be more fiscal stimulus to begin with, and perhaps the dollar will strengthen, Andreassen predicts.
In the professional betting market, you can bet who will win from the two candidates, and here the result is more uncertain than the best statisticians have come up with. If you bet your money on Biden, you get 1.5 times the bet again. This gives a probability weight of around 65-35, far lower than the 87-13 statistician.
Sheriff
Outside the United States, Andreassen says most people think Trump is not good for the world community. Under the current president, the United States has withdrawn from all cooperation agreements with other countries. Andreassen points out that isolationism is not good for the world community.
– His fight against China is widely misunderstood, but the level of conflict increases. It is better with a joint action on how we should behave than to have a sheriff who shoots with the gun, symbolizes the chief economist,
Andreassen makes little sense for the individual countries that will solve all the problems, something he characterizes as
“just nonsense”.
– Now we talk more about politics, but I think it is good for the world community with a president other than Trump. Getting the United States back to the climate deal is good news, it reduces the risk of a trade war. Biden is probably not interested in escalating the conflict with China, predicts the chief economist.
He believes that large US tech companies have a lot to lose from the risk of a regionalized Internet. Overall, Biden is better prepared to defuse the risk of a technological conflict and is more traditional and rational.
Also read: The probability of winning predicted by Donald Trump is exactly the same as at the same time in 2016
Definitely
– If I had had FANG shares (Facebook, Amazon, Netflix or Google, editor’s note), I have no doubt who Biden and Trump would have chosen. We don’t know what framework conditions we have under Trump, while Biden is boring and harmless.
– How would you summarize the economic development of the United States during the four years with Trump?
– It has helped the economic recovery to last, but unemployment has fallen less than under Obama. Part of the rebound may be due to deregulation, but I don’t think it was that important, Andreassen responds.
And growth in the United States over the period has not been particularly stronger than in other countries. In addition, Trump promised in 2016 to pay the debt of the United States government within eight years. It is nowhere near meeting that, on the contrary, there has been a build-up of debt towards the end of a boom.
Mega
– The total deficit in the public sector amounts to up to 7.5 percent of gross domestic product, creating value. I would characterize this as a “mega deficit,” where demand is artificially maintained, says an unimpressed chief economist.
Andreassen believes that no matter who has been president of the United States during these four years, things had gone well financially.
– But the Democrats had been more repressive on fiscal policy and had done more to get rid of the deficit. I also think the stock market has improved. History shows that the stock market is rising lower under Democrats than under Republicans, and public finances are improving, he summarizes.
I want order
One question is how Norway, with our small open economy, will notice a difference. Do we have any contagion effects on the crown and interest rates?
– I really don’t think so, says Andreassen, but nuances:
– The traditional view is that Norway is a small country served by order in the world community and the laws and regulations that large countries respect. It helps that we are protected by the EU, but I think overall it is good to have a president involved in making rational decisions.
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