Trump 2.0?

As if you didn’t know, the US election is fast approaching. Recent national polls seem to suggest that Biden is storming ahead and Trump’s dreams of “Four More Years” of Tweeting “Make America Great Again” from the Oval Office are over.[1] Now, not to be dismissive of these traditional pollsters but these predictions seem somewhat reminiscent of the polls seen before the last US election.

Maybe things are different this time around, certainly the world is a very different place than it was, even a year ago, so will Trump be packing his bags? Perhaps not. According to Professor Stantic, a maverick Australian Computer Scientist who analyses data from social media platforms to make election predictions, Trump is going nowhere. Is the Professor right? Who knows, but he did successfully predict the results of the 2016 US election, the 2016 Brexit vote and the 2019 Australian Federal election using his alternative approach.[2]

But why should investors actually care who is in the White House? Well, the phrase “When America Sneezes, the World Catches Cold” is still relevant today despite the rise of China. A Democrat in the White House has traditionally been a cause for concern for investors, they worry that taxes will rise, and government spending will increase, hindering US economic growth, ultimately reducing equity market returns across the globe.

Luckily for investors, equity markets don’t actually seem to care whether the President’s political symbol is a blue donkey or a red elephant. Research suggests there is no significant link between a President’s political leaning and investors’ returns.[3] What should be of concern to investors is the prospect of a prolonged period of uncertainty if Biden does win and Trump fails to honourably concede defeat, instead pursuing legal avenues to remain in power. This could leave the US in limbo for months, if not years.

Source: Vanguard (2020). Calculations of a 60% equity, 40% fixed income portfolio are based on data from Global Financial Data. Years are categorised based on which political party occupied the White House for the majority of the year.

Now, I am sure you are all eager to hear my prediction as to whether Biden or Trump will win. Unfortunately, my powers of clairvoyance are somewhat lacking, I can never seem to get those six lotto numbers! All I will say, is that whoever becomes President needs to work hard to bring an increasingly polarised America together, if not, four years from now we might be looking at the prospects of a President Kayne West and First Lady Kim Kardashian, assuming he gets his paperwork in on time!

[1] BBC News (2020)

[2] New Zealand Herald (2020)

[3] Vanguard (2020)