US election 2020: of mountains and molehills?

For all the sturm und drang of the US election season, the policy and market implications of November’s US election differ less than we might expect. The most disruptive scenario is not a Trump or a Biden presidency, but a contested election scenario.

29 Oct 2020

10 minutes

Policy and market implications

US political debate is more polarised than ever, but the direct implications for financial markets of the choices before voters this November appear relatively modest.

On the central issues in both domestic and foreign policy, there is likely to be significant continuity in the substance, if not the style, of decision making whatever the electoral outcomes as:

  • there is broad consensus on maintaining or increasing expansionary fiscal policy
  • both sides of the aisle see China as a strategic threat to be confronted
  • there are no signs of turning back from a more protectionist approach to global trade

Healthcare and energy are the sectors where ideological and policy differences are widest, but even here there are reasons to expect change to be incremental and longer term rather than a shock to be priced in the run up to or immediately after the election.

We have focused on areas where likely policy approaches diverge most and have greatest potential for economic and market impact:

  1. COVID-19 Response
  2. Fiscal policy – taxes, benefits, investment
  3. International relations – China, global trade, multilateral institutions
  4. Healthcare
  5. Environment

In each case, we consider the overall political objective, the most attainable policy changes to realise that goal and the implications of those policies.

COVID-19 response

The response to the COVID-19 pandemic has played a significant role in the election campaign and could still be a very high priority challenge at the start of next year.

  • Demonstrate leadership and empathy, respect for science and international co-operation
  • Present the economy as back on its prior track, maintain binary distinction between economic and health outcomes

Authored by

Sahil Mahtani
Strategist, Investment Institute
Daniel Morgan
Analyst, Multi-Asset
Alex Holroyd-Jones
Portfolio Manager

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