Who wins? Trump or Biden

In today’s Exponential Investor…

  • The Elderly Election
  • Cast your vote
  • Three things to consider this election

It’s the showdown of the year!

Trump vs. Biden in the first presidential debate.

By the time you read this it’ll be all over, a “winner” will have been declared by one half of the population, and the other declared a “winner” by the other half.

That’s how political debates go – half love you, the other half hate you, and there’s just a few in the middle you’ve got to convince otherwise.

For what it’s worth, my view is that President Trump will win another term, and you can expect more over the next four years as you’ve got over the last four.

I will also note, I’m usually pretty rubbish at forecasting the results of an election. Unless it’s blatantly obvious as some are, such as the last British general election – literally anyone could have beaten Jeremy Corbyn at the polls.

Nonetheless, here we’re looking at the two ageing, borderline “elderly” gentlemen (using that term loosely) that are set to contest the US election this November.

And in looking at what this means for the UK, UK investors and the UK market, I would like to level a question at you. Perhaps two questions…

Who and what?

First question,

Who wins the election this November?

Great, thanks for that.

Now based on your choice you just answered, here’s another question for you,

If Trump wins, does the US market prepare for another four-year bull market, or does the market tank?

Likewise, if Biden wins, does the US market prepare for another four-year bull market, or does the market tank?

The answer to this second set, I’d be keen to hear from you directly. So again, if you’ve got the time and inclination, I’d love to hear from you as to what you think the market will do based on who you think will win the US election.

Here’s why I’m keen to see what you think…

You see back in 2015 and 2016, there was a widespread view amongst the mainstream media that Trump was going to be bad for the markets.

And not in a gentle, the markets are going to trade sideways for the next four years, kind of way. But in a very much, the market will tank if Trump wins, kind of way.

Here’s the proof too,

On 21 October 2016, a piece in Politico ran the headline,

Economists: A Trump win would tank the markets

These so-called expert economists were predicting “Brexit-style” selling in the market if Trump were to win and become president.

The New York Times had a piece on 31 October 2016 with the headline,

What Happens to the Markets if Donald Trump Wins?

Another economist from MIT explained a Trump win would, “likely cause the stock market to crash and plunge the world into recession.”

And that Mr Trump’s “anti-trade policies would cause a sharp slowdown, much like the British are experiencing [with Brexit]”.

Then there was this gem of a headline from CNN on 24 October:

A Trump win would sink stocks. What about Clinton?

Wonderful forecasting there from another mainstream media outlet and its roster of experts. Again, the comparisons to the UK were astonishing.

“America’s Brexit” was a term used in that article.

Well, boy oh boy that didn’t quite pan out as they’d expected.

Here’s how the US S&P 500 looks since Trump’s election win.

Even after the wild crash this year, the S&P at the bottom in March was still higher than when Trump got elected.

Now give him as much stick as you like. But you can’t deny the US market has been a ripe place for the pickings over the last four years.

Here’s the thing, I’m not having a go at the economists for saying Trump would tank the market. At least they had a view regardless of how wildly wrong it was. It would be interesting to see how many of them have fessed up and copped it on the chin for that.

Anyway, the point here is that’s the past. What about the future?

Three points to consider

We’re in the same place as we were in 2016. The verge of another US presidential election. The conditions however are vastly different to where they were in 2016.

The market might be up, but US unemployment is spiking into double figures. The social unrest in the US means you’d be better off having a holiday in Azerbaijan about now. And all the “wealth” that’s apparently been created and making the US grow is not finding its way down into the real economy apparently whatsoever.

Does Biden change that? Or is change the last thing the US needs right now?

Well here’s my take:

  1. Trump wins. I think the polls and the data being collected now is a bit like Twitter during the UK general election. If you’d been on Twitter during the vote you’d have been certain there was a mass uprising for Corbyn and Labour would walk away with the title… No. Not at all. Social media is the least reflective view of an entire nation.
  2. If Trump wins, the market doesn’t “tank” but we see at least 20% off its current valuations. That means some rationality returns to the valuations of some of the biggest companies in the world. Not all the market, a lot of the US market is already still reeling from this year. But “Big Tech” cops its fair clip as it deserves right now.
  3. If Biden wins, see point 2.

I don’t think it matters who wins in November. It doesn’t matter who won last night’s debate.

The market has already proven to have a mind of its own, and I don’t believe this election is going to move the needle either way for investors.

Big Tech’s reckoning is coming – a return to semi-sane valuations is coming. And there will be other opportunity in pockets of the US market that will provide more growth opportunities than companies with market caps over $100 billion.

Still, it’ll be interesting this time next year to return to this piece and see how wrong – or wildly right I was.


Sam Volkering
Editor, Exponential Investor

Category: Commodities

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