Trading Preview: US Election Special
Well, the big day is nearly upon us. But which way will it go? Will Trump get to hold onto the keys to 1600 Penn. Ave.? Or will ‘Big Joe’ become the 46th POTUS? How will either of these results affect what comes next? This article will dig into all of the possible outcomes before presenting some of the other trading events you can’t afford to miss. Let’s go!
Possible outcomes of the US Presidential Election
This week, hundreds of millions of Americans will exercise their ultimate democratic right to choose their commander-in-chief, the figurehead of the most powerful nation on the planet and so-called leader of the free world. No pressure!
But what could happen?
Essentially, there are four potential outcomes:
- Biden wins the Presidency and the Democrats take the Senate
- Biden becomes POTUS and the Republicans hold the Senate
- Trump keeps the top gig and the Republicans hold the Senate
- Trump takes the Oval Office and the Democrats nab the Senate
Let’s put a little more meat on each of those bones.
1. The ‘Blue Sweep’
If the Democrats win the Whitehouse and a majority in the Senate, they will rule all, already having a majority in the House of Representatives.
This result would certainly provide a boost to the economy, not least due to the fact that it would likely pave the way for a gigantic $2 trillion stimulus package, which could “lift real GDP growth by about 5 percentage points, add 3 million jobs, and lower the unemployment rate by nearly 2 percentage points,” according to Deutsche Bank.
This result would also open the door for Biden’s proposed $2.5 trillion of tax increases over the next decade… The money has to come from somewhere, right?
2. Biden wins, GOP hold the Senate
A Biden win and a Republican Senate probably wouldn’t be great for 2021 growth. A fiscal stimulus would likely be greatly reduced and big chunks of Biden’s electoral promises, achievable through executive orders, would meet with a tidal wave of opposition and potentially a veto parade. This wouldn’t be a good result for an America that needs a clear and effective decision making process in the months ahead.
3. Trump wins, GOP hold the Senate
Any major fiscal stimulus would almost have no chance under this scenario. Trump would pursue a greatly reduced amount than Biden, so the recovery is likely to be slower.
As far as trade goes, buckle up for the next round of the US-China Trade War.
4. Trump wins, Dems take the Senate
This one has a relatively low probability of happening, but hey ho! The fiscal stimulus package would probably be beefy, around the $2 trillion mark. Trump and a fully-Democratic Congress wouldn’t agree on much, but a couple of areas that they would sync on is spending on infrastructure and taking a hard line on trade with China.
If this one happens, stock up on popcorn, you’re going to need a constant supply!
One more thing to keep in mind…
It’s pretty rare to find an event that eclipses the importance of what is arguably the single most important election on the planet. But these are strange times and this election has had to share considerable airtime with the worst pandemic for over 100 years.
The ongoing effects of the pandemic can’t be ignored by traders. It has ravaged national economies all over the world and the prospect of a long winter lies ahead. Many European countries are, at least temporarily, already back into an enforced lockdown situation.
Keep an eye on developments over the next week or so.
What’s on the global agenda this week?
A busy week ahead, here’s everything you can’t afford to miss:
Monday 2nd November
● The US will announce both it’s Markit Manufacutring PMI and ISM Manufacturing PMI (USD)
Tuesday 3rd November
● The US Presidential Election (USD)
● Australia will announce its Interest Rate Decision (AUD)
● New Zealand will give an update on its current (un)employment numbers (NZD)
Wednesday 4th November
● Canada will announce its Balance of Trade figures (CAD)
Thursday 5th November
● The Bank of England will unveil its Inflation Report and Interest Rate decision (GBP)
● The Fed will also outline its own Interest Rate decision (USD)
Friday 6th November
● Canada will announce its employment figures (CAD)
● Followed by the US doing the same, as well as announcing it’s all important Non-Farm Payrolls (USD)
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Speak soon!
The Contentworks team
