“Election Day”: The 2020 US Presidential Election

As Election Day looms in the US, we take a look at the prospects for both candidates winning the White House and Congress, because without the House of Representatives and Senate on their side, their ability to deliver on their mandates will be greatly reduced.

Trump Campaign Turnaround? – Time is Running Out

With the rising COVID-19 cases, and the health of the US economy, the two most important issues for voters this election, President Trump’s lackadaisical approach to the pandemic is costing him votes. Despite his own COVID-19 infection, there has been little evidence of a new strategy by President Trump to win over undecided voters. If President Trump wins a second term, it will most likely be because of a last minute “October Surprise” event in the final days of the election, sizeable errors in the opinion polls in key battleground states, and/or a large number of votes for Biden are deemed inadmissible and not counted.

Biden Ahead – But Still a Long Night Ahead

As is the case in every US presidential election – what matters the most is the size of a candidate’s lead in the key “Battleground States”, which in turn, will decide the Electoral College vote, and ultimately the winner of the election. This year, they include Arizona, Michigan Pennsylvania, Florida, and Wisconsin, and though Biden currently leads in these states, anything can happen up until, and including, on election day.

Key Policies for Trump’s Second Term

In its current state, President Trump’s re-election platform lacks much in the way of defined strategies, tactics, and policies. One topic that was mentioned repeatedly was a new round of tax cuts for US taxpayers, but the odds of pushing these through without a Republican-controlled House of Representatives, which looks quite low, is highly unlikely. Without support from both the Senate and Congress, Trump’s second term would look similar to the current status quo, where the focus would be on deregulation, trade policy, and foreign policy. In the past, these are the areas where President Trump would (continue) to have considerable manoeuvrability without the need for a Democratic-controlled Congress.

Biden’s First 100 Days

Biden’s policy agenda is quite broad, but in its simplest form – Biden’s policies would call for, and see, a larger role for the government in the economy. In fact, such policy points include:

  • Emergency fiscal stimulus measures and programs to support the areas of society, and the economy, that were hit hard by the recession and struggling to recover.
  • A Federally-led commitment and initiative to handle the COVID-19 pandemic more seriously.
  • Socio-economic redistribution through higher taxes on the wealthy and larger corporations, to help pay for better access to healthcare and other social programs.
  • Focusing resources on infrastructure and climate change initiatives.

“Last Battleground” – Fight for the Senate

For the more ambitious parts of Biden’s agenda to be delivered, the Democrats will need to take control of the Senate this election, where the Republicans currently have a majority by six seats. While many of these seats are considered safe, roughly 10 of them will determine the overall outcome of who controls the Senate. Given what the current polls suggest, some of these Senate races are even tighter than in the Presidential one, indicating that this is going to be the “Last Battleground” on election night.

“Match Made in Heaven?” – The Federal Reserve and Fiscal Stimulus

The expansionary fiscal policy carried out by the Trump administration in 2016 was seen as likely to increase inflation, an outcome the Federal Reserve (“Fed”) would typically try to avoid by raising interest rates. This was done starting in 2017, where the Fed raised rates three times, followed by additional four hikes in 2018. Even in the midst of this new tightening regime, core US inflation barely cracked 2% in 2018, before falling back below this level in 2019.

The Federal Reserve has learned from this experience, and has begun to change its approach to monetary policy, most recently through the new strategic framework announced in August 2020. Through this new framework, the Fed will no longer raise interest rates based solely on strong growth or low unemployment – it must be accompanied with stronger inflation.

Nonetheless, who ever wins the election, the Federal Reserve will continue to maintain its expansionary monetary policy. Given this, we believe that the best case scenario for markets would be a Biden win. Under a Biden administration, expansionary monetary policy, coupled with aggressive fiscal stimulus, would propel the US economy and financial markets to outperform their Developed Market peers in the near term.


Overall, regardless of the outcome of the election, we recommend investors to be ready for all possible scenarios for when after the political dust settles.

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© 2020 Economics Global Inc.

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