election test








 

Trump vs Biden. Modern history is shaping.
Markets are changing. What should investors expect?

How the biggest economic event of the year will impact the markets?
Investors are already anticipating that the outcome of this year’s race for the White House will have an impact on trading.

FXPRIMUS Market Analyst Team gives us an in-depth analysis of the 2020 US election and shares insights to stay ahead of the markets.

FLAG

The House of Representatives is all but certain to remain in Democratic hands, but the fate of the Senate is more uncertain. Each state has two seats in the 100-seat Senate irrespective of their size, and only 35 of those seats are up for grabs this year. Republicans currently have a 53-47 majority, but 23 Republicans will have to defend their seats this year vs only 12 Democrats. RealClearPolitics expects 46 seats to be relatively safely in Democratic hands and an equal 46 in Republican ones, while 8 seats are what they call toss-ups, i.e. close races.

How will markets react to 2020 US elections?

Global markets have been on a wild ride in 2020 thus far, juggling the Covid-19 and the various fiscal decisions central banks and governments have made in response. With the U.S. presidential election coming soon, market volatility has been increasing as the unprecedented level of absentee ballots or postal votes suggests it could take days or even weeks to announce the final outcome.Traders need to stay alert, since the markets are likely to be volatile in the following months due to heightened political and economic uncertainty. Election-related volatility could even continue until inauguration day on 20th January, 2021.

The US Presidential candidates are poles apart on many aspects, including economic policy, climate diplomacy, healthcare, foreign policy, racial justice, immigration, trade and China – all of which could have a cascading impact on financial markets: A decisive Democratic victory would probably hit the USD and support European assets, while another Trump term would be full of uncertainties. A Biden presidency would lead to a more stable global trade environment, which would support a weaker USD and a clearly higher EUR/USD. European assets should perform vs US ones.

40%
Probability

Biden wins both chambers of congress go to Democrats

Weaker USD, higer EUR/USD. BIden’s tax hike plans may put some downside p[ressure on US equities (especially vs European equities). Rates low for a long time, but the yield curve may steepen in the shirt run.

30%
Probability

Trumps wins, divided Congress

Stronger USD Lower EUR/USD, some support for equities (at least initially). Yield curve could steepen modestly.

20%
Probability

Biden wins, divided congress

Weaker USD, higer EUR/USD. Direct impact on US equities muted (but European equities perform vs US ones). Rates low for a long time.

The S&P500 Index Tends To Grow Faster With A Democratic President

The Economy Has Grown Faster Under Democratic Presidents

The Economy Has Grown Faster Under Democratic Presidents

Economic policies: Biden VS Trump

A brief overview of Democratic and Republican policy differences

Biden and the Democrats would probably introduce a sizable fiscal easing package in early 2021, assuming the economy would still be significantly burdened by Covid-19.

Biden would seek to increase investments in the housing market, social security and health care. He would seek to reverse some of the tax cuts implemented by Trump, and also reverse some of his deregulation agenda, especially with regards to the climate agenda.

His plans would include higher corporate, dividend and capital gains taxes, which could scare equity investors to some extent. A Biden presidency would lead to a more stable global trade environment, which would support a weaker USD and a clearly higher EUR/USD. European assets should perform vs US ones.

Trump would favour more tax cuts, deregulation and a more limited stimulus package.

The trade war could escalate and his unpredictability could dent risk appetite longer out. Global trade policy would become even more uncertain, supporting the USD.

EUR/USD would drop, especially if tariffs on European cars would return on his agenda.

Joe Biden
The Democratic Party nominee

Biden’s tax plans include raising taxes on the wealthy and on corporations by reversing some of tax cuts that President Donald Trump signed into law in 2017.

TAXES

Donald Trump
The Republican incumbent

President Donald Trump wants to extend the 2017 tax overhaul for individuals, continuing his pro-business agenda.

Joe Biden
The Democratic Party nominee

Biden’s plan focuses on infrastructure spending and on climate change as well, which could impact the environmental and energy sector. His aim is to move the U.S. to net-zero greenhouse gas emissions and create jobs to expand the middle class.

SPENDING

Donald Trump
The Republican incumbent

Throughout his administration, Trump has focused on infrastructure spending and wants to continue his efforts, proposing another $1 trillion package.

Joe Biden
The Democratic Party nominee

Biden plans to invest in innovation and the middle classes. While both candidates view China’s rising economy as a potential threat, Biden wants a coalition with international allies to pressure China, such as repairing relations towards the EU.

TRADE

Donald Trump
The Republican incumbent

While both candidates view China’s rising economy as a potential threat, Trump’s trade war with China goes on.

Joe Biden
The Democratic Party nominee

Biden supports the framework of the GReen New Deal. Biden may be more likely to impose new rules to protect the environment,since he wants net-zero emissions by 2050. Biden will rejoin Paris climate agreement.

CLIMATE CHANGE

Donald Trump
The Republican incumbent

Trump doesn’t believe in climate change and is a strong supporter of the fossil fuels industry,funding with billions of dollars. Trump is pulling America out of the Paris climate agreement.

Joe Biden
The Democratic Party nominee

Biden wants to create a public health insurance option and to lower the eligibility age for Medicare to 60 from 65.

HEALTH CARE

Donald Trump
The Republican incumbent

Trump budget proposes spending cuts to Medicare and Medicaid, and lowering drug prices.

If you found this analysis interesting, you should definitely join PRIMUS Live, where our Market Analysts will be discussing the US election and its impact on the markets. Don’t miss it out!

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