Skip to content

Insights

US Election Series

The results of the 2020 US election in November are likely to have far-reaching consequences, with economic, policy and market implications in the US and around the world.

Countdown to the 2020 US Election

October 6, 2020

SARAH HEWIN, HEAD OF RESEARCH, EUROPE AND AMERICAS
PHILIPPE DAUBA-PANTANACCE, EXECUTIVE DIRECTOR, GEOPOLITICAL STRATEGIST

STEVE ENGLANDER, MANAGING DIRECTOR, GLOBAL HEAD OF G10 FX RESEARCH
WESLEY WHITE, HEAD, MACRO TRADING EUROPE

What’s likely, what’s possible, and what will the results mean?

Just hours before the first US presidential election debate on September 29, economists from across Standard Chartered gathered to reflect on the implications of a Biden or Trump victory, both in the US and globally. With the first debate over, our analysts highlight the leading indicators to track and the potential impact for our clients. Here is a look at some of the big issues they will be watching closely in the run-up to the highly anticipated 2020 election.

Will we see a result on November 3?

The combative first debate certainly sets an uncomfortable tone for the remaining weeks of the election season. What matters more, however, is the margin by which the lead candidate emerges on election night and how many people cast their votes by mail — possibly delaying a definitive result. If the result is clear to all, it is likely that either losing candidate would accept the result — although we might have to wait for a week or more after the election for the counting of all mail-in ballots. Less likely, but nevertheless a concern, is the possibility that a close call would be contested. This could mean that a winner might not emerge before the Electoral College meets on December 14, with both political and market ramifications in the US and globally.

An unprecedented economic challenge

COVID-19 continues to dominate both the political and economic agenda, and a new or second term President will inherit an unprecedented deficit/GDP ratio of more than 20% that neither would seek to balance in the short to medium term given the scale of the economic challenge. Although economic activity is picking up, consumer confidence remains low and will take a further hit if election results are uncertain. Trump is likely to continue with tax cuts, if he can. Conversely, Biden would reverse some of the cuts introduced during Trump’s first term and look to implement capital gains and income tax rises for higher earners in order to increase spending on health and education. Biden also favors a major ‘green’ infrastructure program to create jobs and combat climate change. However, if the Democrats do not win the Senate, measures like this are going to be much more difficult to push through.

Global trade confidence

The external balance of trade continues to deteriorate. In all likelihood, both Biden and Trump would need to reset the trade position with China.  However, the manner in which each would do so will naturally differ, with Trump continuing an adversarial stance and Biden more inclined to seek support from traditional US allies in Europe, Asia and the Middle East. Policies towards Europe differ, with Trump continuing to put pressure on Europe, while Biden would aim to improve strained relationships.

Based on his less antagonistic stance and  more collaborative approach, a Biden presidency would be likely to encourage momentum and confidence in global trade; however, Congressional support would impact the delivery of this agenda.

The market view

The US dollar has been on a downward trend that is likely to continue under either Biden or Trump, although it could be quicker and deeper under Biden. Dollar weakness under a Biden presidency would likely reflect lower risk premia and increased risk appetite in foreign markets, as well as unattractive prospective returns among US assets.

Yields are unlikely to increase and the Federal Reserve would be careful to avoid actions that could risk jobs or growth. Given Biden’s commitment to tax raising, US equities are likely to weaken. In contrast, the first Trump presidency saw a surge in US equity prices and a second term might initially be further supportive. If the election result is conclusive, market volatility is likely to settle, and foreign asset markets strengthen in the case of a Biden victory. However, volatility would spike in the case of an uncertain or contested result, and bond yields would likely fall.  

Check back in for upcoming analysis on the 2020 US Election.