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US Elections 2020: What Results Can Impact the Market
October 16, 2020 - October 31, 2020
With less than a month before the US election, market participants have started to pay more attention to the polls, debates and headlines about the event. They try to figure out what would be the results have implications for global financial markets.
In this report, we present our own simple view of how the market can respond to the results of the election, even though it is not an easy task to do. Remember that before the 2016 elections, the financial community is almost certain that Trump would prove negative for equities, but in fact, after the outcome was sealed, the stock market soared.
US Citizens Decide On Next US President On November 3, the US citizens head to the ballot for the 59th presidential election. Although they will choose their candidate preferences, they actually vote for electors, who, in their turn, will vote on Dec.14 for the next president and vice president.
Donald Trump and Mike Pence secured the Republican nomination without serious opposition, while former vice-president Joe Biden secured the Democratic nomination over his closest rival, Bernie Sanders.
On August 11, Biden officially announced that their partner’s vice president will Senator Kamala Harris, who made him the first African-American, the first Indian-American, the first Asian-American and women candidates for vice president’s third major party ticket. Relative to the other party, the Liberal nomination for Jo Jorgensen and Spike Cohen, while the Greens, the nominees are Howie Hawkins and Angela Nicole Walker.
Biden Leads Polls
According to the national poll, the two candidates, so far, Donald Trump and Joe Biden, the latter leading to a 51% to 42%. The poll is a good guide in expressing popular candidates, but they are not always accurate in predicting the outcome of the election.
Just take the 2016 election. Hillary Clinton leads the polls and even earned an estimated three million people over Trump did, but still, he loses. In the US, won the most votes does not always guaranties a victory as the nation using the electoral college system.
Electoral College System
Electoral college is a group of voters that we have mentioned. The number of voters from each state is almost proportional to its population. There are 538 voters in total, and thus, the candidate for the lock position in the Oval Office, must collect a total of 270, or more, people.
Generally, the state electoral vote for whoever wins the ordinary voters. For example, if Biden won 55% of the vote in California, he will be given all the country’s elections.
There are only two states, Maine and Nebraska, which split their vote in accordance with the assessment of each candidate receives. In some countries, voters may vote for candidates of their choice, even if residents choose another candidate. However, almost always, voters vote for the candidate who receives the most votes in their state.
What Trump Popularity Affected?
At this time, polls in battleground states supporting Joe Biden. Thus, the events that affect the popularity Trump most? First and foremost, we have a pandemic coronavirus.
Support for the way he dealt with the crisis peaked in March when he declared a national emergency and offered USD 50 billion in aid to stop the spread of the virus. However, support for the response since decreased, even with his own supporters questioned the approach, such as the virus continues to spread in the US with very fast speed.
US-China trade Sequel also has dominated the headlines over the past Donald Trump, the US president to impose tariffs on imports from China, and China responded with the same way. All of this has become a burden for exporters who may eventually decide to elect another president. Last but not least, we have the way President Trump responded with widespread protests over racial injustice.
In the world of FX, Biden victory could lead to a slide in the US dollar. Both candidates are expected to encourage more infrastructure spending, but the agenda of Biden is looser, combined with extra-accommodative Fed could lead to some dollar selling.
Yen and other safe havens could also slide on expectations of better handling of international trade relations, while the commodity-linked Aussie and Kiwi to strengthen.
the reverse may be true if Trump will be re-elected. Now in case we get a period of uncertainty, since the delay in announcing the winner, or even elections contested (Trump says that he may not accept defeat as a mail-in ballot can cause voter fraud), risky assets around the world may suffer as investors seek refuge in a safe haven until we have a clear result.
The composition of Congress Can Also Play. a role
Having said all that, the market reaction may also depend on which party will get a majority in the US Congress. Congress consists of two chambers: the House of Representatives and the Senate. Currently Democrats hold the majority in the House, while the Senate is controlled by Republicans. Whoever is elected, his party’s failure to take full control of Congress could lead to a more modest market reaction, because he may not be able to push through with its agenda.
For example, if Biden was elected but failed to flip the Senate The stock market may not slide much, in the hope that Republicans might veto a decision to increase corporate taxes. Republicans also oppose spending agenda, which means softer slide in the dollar rather than the reverse.