Simon Lloyd – Chief Investment Officer
The year 2020 has been as unprecedented as it has been unusual. As the world continues to grapple with the Covid-19 Pandemic. Governments, companies and individuals have been forced to come to terms with the so called, new normal. With the backdrop of a global pandemic, this year’s US Presidential Election has been no less tumultuous. With the sitting Republican President, Donald Trump looking to secure a second term, in the face of the Democratic nominee, former Vice President Joe Biden. The last few weeks of the campaign saw pollsters forecasting a convincing Democratic win; with some going as far to predict a “Blue Wave”, whereby the Democrats win the White House and both houses of Congress.
This prediction has proven to be inaccurate. As Biden’s hopes of an early, decisive victory were shattered late Tuesday, November third, as President Trump won the key battlegrounds states of Florida, Ohio and Texas. Neither candidate has been able to secure an absolute majority of electoral votes, 270 or more, required to win the Presidency. The election results hang on a knife edge, as millions of postal votes- continue to be counted and President Trump makes claims of foul play.
The preliminary Congressional results indicate the Republican party may marginally win both the Senate and the House elections, resulting in relatively conservative fiscal policies, regardless of who occupies the White House. In the case of a Biden win, he would face significant Congressional opposition to any significant budgetary or regulatory changes. This would pose headwinds to his ambitious agenda, including; doubling the tax rate on capital gains for high earners, investing trillions in green infrastructure and expanding a government-backed alternative to private health insurance. Were Trump to retain the presidency, it is difficult to say what impact a marginal hold on Congress will have, given the lack of clarity surrounding his polices for his second term. The President has failed to set clear policies, instead favouring vague of rhetoric such as “Create 10 Million New Jobs in 10 Months”.
From the perspective of a UK investor, this uncertainty will result in higher volatility in not only US holdings but across a wide range of related markets. Prospects of a streamlined US/UK trade deal under the Trump Administration, may not materialise with the more European focused, Biden. Where there is uncertainty there is volatility, and the market will continue to react to the evolving picture.
Ultimately, regardless of the final outcome of the Presidential Election, the winner will face significant barriers to implementing meaningful change. So, business as usual in the US.