Biden Election Win Could Reduce Market Volatility

The handling of the Covid-19 pandemic by Donald Trump may result in an election win for Joe Biden resulting in reduced market volatility and fears of de-globalisation, according to a global investment and asset management firm.


Aberdeen Standard Investment (ASI) says that many of its MENA based clients are now looking beyond the topic of economic recovery and have started to look for expert analysis on the upcoming US Presidential election between Donald Trump and Joe Biden, due to take place in November.


Supported by a renowned international team of investment researchers, Stephanie Kelly, Political Economist at ASI, says the firm thinks Mr Biden currently has the edge, but there are key factors to be carefully scrutinised in the coming months.


She said: “Although our clients’ queries are still very much focussed on the global economic recovery following the Covid-19 pandemic, many are also asking for our views on the possible outcomes of the election and what that may mean for global markets.


“Trump has drawn criticism for his handling of the coronavirus crisis, though this has been along existing party lines. Nonetheless, his re-election strategy will have to shift away from the previous two-prong approach of talking about how strong the economy is and painting the Democratic candidate as a socialist. The first leg of that strategy is already severely compromised by the economic damage from coronavirus fallout and Joe Biden is hard to paint as a socialist.


“Biden is a well-known comparative moderate within the Democratic Party who historically favoured free trade, and still supports multilateralism, upskilling the US workforce and investing in infrastructure. He has strong election credentials too: he benefits from popularity with black voters, a key demographic; doesn’t carry the same negative baggage as Hilary Clinton in 2016; and has credibility with non-college educated white voters who might have supported Trump last time around.


“However, the virus heightens uncertainty about how campaigns will rally and even how voters will turnout. There are six key states to watch: Arizona, Florida, Michigan, North Carolina, Pennsylvania, and Wisconsin.”


ASI, which has a regional office in Abu Dhabi Global Markets, believes that it is more likely Biden will win the election, given current polling and the myriad of challenges the coronavirus crisis creates for President Trump. In addition to head-to-head polling, ASI will also be keeping an eye on unemployment rates, the prevalence of the virus across Republican and swing states and the economic impact of any re-imposed lockdowns among other factors.


Stephanie continued: “Avoiding a second infection wave before November and getting the unemployment rate down a long way will be crucial if Trump is to secure a second term. If Biden secures the Presidency, Congress would be crucial for any fiscal plans he has given the complex, politicised budget process. The probability of a Democrat majority in the Senate has increased in recent weeks, which would make legislating much easier.


“However, if Republicans retain their Senate majority there is a good chance they will follow the conservative playbook from the Obama years and try to force fiscal tightening before the economy is ready. That in turn would lead to a substantially weaker recovery.


“Regulation, where the President has more power, would likely tighten for certain sectors under Biden. Although he has not clearly articulated the sectors he would increase regulation on, we expect energy to be high on the agenda as he is strongly committed to more significant action to combat climate change, while financials and tech might be under some pressure too.


“Biden’s constructive tone on trade would reduce headline volatility and fears of de-globalisation, though he is unlikely to rapidly reduce trade barriers given the domestic political backdrop. Additionally, his focus on upskilling and infrastructure is encouraging both in terms of boosting potential growth and addressing some of the voter dissatisfaction around middle class income stagnation.”


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