The Big US Election ‘What If?’ How might the economy look after 3 November 2020?

Opinion by Daniel Kibel

The Big US Election ‘What If?’ How might the economy look after 3 November 2020?
The Big US Election 'What If?' How might the economy look after 3 November 2020?

Johannesburg, 2 November 2020: With the hotly contested United States elections looming on 3 November, Daniel Kibel, Co-Founder of CM Trading, considers the economic effects that may follow.

“With Biden’s narrow lead in current polls, this election could be anyone’s race at this stage. The candidates this year are polar opposites. On one hand, Trump is single-mindedly focused on getting the American economy going despite the COVID crisis. Whereas Biden stands firm that dealing with the pandemic should be an absolute priority. Both candidates are in their 70s. And at 78, should Biden win, he would be the oldest first-term president in US history.

“On Wall Street, Goldman Sachs analysts predict that the Democrats will narrowly win. Strategists from JP Morgan agree. Polls conducted by CNN also favour Biden. But the Electoral College system was the root one of the United States’ biggest political upsets in 2016, when Trump beat out Hillary Clinton, despite her having over two million more votes than he did. And again, this could cast doubt on 2020’s results.

Big business and China

“One standout factor during Trump’s term was his decision to withdraw America from the Paris Agreement on Climate Change – an international agreement in favour of lowering global emissions. This is truly indicative of Trump’s traditionally pro big business approach. Though it is potentially disastrous for the environment, the decision had a very positive effect on several big companies – especially coal producers and exporters. Trump’s economic ‘war’ on China also stands out, between tariff battles, trade barriers and each country brandishing their sabres against one another repeatedly.

“In terms of the financial markets, in the event of a Democratic win, we may see a sell-off on stocks due to Biden’s more global outlook. While Trump is extremely controversial, he has, in many ways, been good for business. He practically ignores carbon emissions and has lenient tax policies towards large corporations. In that regard, a Republican win will probably see minimal change in the markets – in the short-term at least. Should the Democrats take it, business won’t be able to ‘pollute freely’ as Trump has permitted anymore. And Biden may also have a different attitude towards relations with China – though that is uncertain at this stage.

COVID and the big ‘What if?’

“Even widespread civil unrest and protests in the US had minimal impact on the US economy. Almost everything has been overshadowed by COVID this year. In a time when COVID didn’t exist, there may have been a rollover effect but 2020 has been a different kind of year.

“Analysts are predicting a record turnout of voters this year. And given Trump’s highly controversial and divisive persona, it’s probably quite likely that the American public will head to the polls en masse.

“The most fascinating thing about this particular election is; what if there is no direct winner? This is where we might see real volatility coming into financial markets. I think it’s safe to say that the postal votes are likely to favour the democrats. But voting on the day may favour Trump. And one thing financial markets don’t cope well with is uncertainty.

“An unclear result could be disastrous for the dollar and the markets. If uncertainty looms, we will probably see very negative effects on the US economy. And in an even more extreme scenario, what if Trump refuses to step down? It is these potential uncertainties and upsets that could severely affect US markets. All we can do right now is wait, see and hope for the best”.

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