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What would a Trump win mean for markets?

President Trump is currently behind in the polls, but retains his bombastic optimism

President Trump

Remember 2016? – when it was close but Hilary Clinton was going to win?

This time round it’s not quite so close, and Joe Biden’s is apparently going to win. That’s what the polls say, and that’s what most media narratives are saying too. But are they right?

Media pundits, especially in the US, have a tendency to let wish fulfillment colour their narratives, which in turn means that truly objective analysis is hard to come by.

Yes, a huge swathe of heavily-populated coastal America is sick to the back teeth of President Trump and can’t wait to see the back of him. But there is also a sizeable group of thoughtful Americans who look at the ongoing destruction in Portland and Seattle, the increasingly totalitarian strictures of critical race theory, and the denigration of the police by the intellectual left, and wonder whether or not Trump might not be the lesser of two evils.

In short, the race is still up in the air and, although the Trump campaign did seem to falter slightly when the President himself got the coronavirus, it now seems to be back on track. The rallies have started up again, and so has the Twittering.

Markets, meanwhile, continue to trade in an atmosphere of cautious optimism. As the well-known aphorism has it, markets hate uncertainty, and one way or another the uncertainty in US Presidential politics is about to be removed for at least another four years.

That in turn means that someone will likely pass either one, or more than one stimulus package, and that markets will be buoyed by these if nothing else. That’ll be as true of a Trump win as it will be of a Biden win.

But markets could end up being more responsive to a Trump win than a Biden win for other reasons too. There’s a broad understanding that the mooted Biden Presidency will be more prone to regulate, will be negatively disposed to fossil fuels and the extractive industries in general, and may end up tying itself in all sorts of knots over the enforcement of diversity legislation. If Trump wins, the negativity around all that uncertainty will disappear in a puff of smoke, or teargas, and markets may well rise.

On the other hand, the US economy will continue to be hidebound by the coronavirus, and it’s hard to see that situation turning around before the middle of next year. By contrast, over in China, where the pandemic began, things are almost back to normal and the country has returned to its habitual posting of stellar growth figures – 4.9% for the past quarter.

But talking of China, it’s probably fair to say that if President Trump wins, relations with China are unlikely to improve any time soon. Trump has dubbed the coronavirus the “China virus”, and although the wish-fulfilling media has declined to play along, there is some evidence that this apportioning of blame has some resonance on the ground.

A bad relationship with China wouldn’t, on the whole, be good for the global economy, and that in turn might mean that on a longer view US markets don’t do as well as they otherwise might have done. On the other hand, using the coronavirus as a stick with which to beat China will allow Donald Trump cover under which he can continue his campaign to repatriate manufacturing jobs to the US. That’s a campaign that plays well in certain constituencies, like Pennsylvania coal country and the old manufacturing hubs of the Mid-West, but it’s real impact is likely to remain limited.

After all, whether jobs are in China or the US, the reality that the world is beginning to face up to is that actually all jobs are in danger of automation. So although manufacturing could return to the US, whether it will actually bring any jobs with it is open to question.

These issues though, aren’t exactly at the forefront of voters’ minds now though. A prevailing narrative in the Democratic party is that Republicans are callous about death, while a prevailing narrative in the Republican party is that Democrats are careless of freedoms that have taken centuries to win.

And as long as these abstract narratives predominate, getting a steer as to where either party stands on hard issues remains difficult. Which is probably why a win for neither candidate will stimulate any kind of meaningful rally, and why too the gold price remains above US$1,900 an ounce.

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