I think this is useful perspective and to be learned my conviction builds as DT is back on the campaign trail again. My friend Martin Malone has done the best work here and makes a key point still hugely under-appreciated by the mainstream: Significant changes have taken place with election demographics for the 2020 election compared to 2016. Hispanics
dominate the increased share of voters in 2020. The ELECTION WIN in 2020 will be decided by MINORITIES. Trump's share of the Hispanic & Black vote in 2020 will be larger than 2016.
The "silent majority" is much larger in 2020 due to the upgraded economic performance over the past four years. Expect Trump to win all the States his campaign won in 2016 and flip four others: Maine, Minnesota, Nevada, and New Hampshire.
For a bit more meat on the bone.. I think this as good a way of summing it up as any.
Courtesy of Gavekal.
Donald Trump's policies best thought of in this way; as a businessman, since taking office in 2017 his singular goal has been to keep US firms' return on invested capital as high as possible. To achieve this he used almost every policy trick in the book.
* Tax cuts have been undertaken, leading to massive budget deficits.
* Large-scale deregulation has been pursued.
* Climate change threats have been ignored and the US withdrew from the Paris agreement.
* Protectionism has been pursued using punitive tariffs and embargoes.
* The White House has constantly pushed for lower interest rates.
* Diplomatic threats have been made against friend and foe alike.
* Subsidies have been granted to a range of firms.
* US monopolies have been defended, especially from European attack.
The net result is that the US equity market has outperformed non-US markets by a hefty 31% over the last four years. One may have expected the combination of both fiscal and monetary policies being loose to push the US dollar lower, yet Trump's "America first" stance has made other currencies less attractive.
At the same time, the budgetary and monetary policies run outside of the US have often been just as bad, or worse. So, if Trump is reelected , safe to say you can expect more of the same, with an emphasis on cutting military forces outside of the US, which could be marginally good for the dollar against the euro.
So what about a Joe Biden win, especially if it involves a Democratic clean-sweep of Washington, as currently implied by opinion polling?
* The Trump tax cuts will be replaced by tax increases.
* Deregulation will be replaced by re-regulation, favouring big companies and hurting small ones.
* Protectionism will probably continue, but against a different basket of goods and services.
* Rates could hardly go lower and may rise if inflation picks up.
* Diplomatic threats will disappear, except perhaps against Russia.
* Subsidies will continue, and in some areas may increase.
* Some antitrust actions may be initiated against dominant companies, but this will be tempered by most of them having supported the Democrats.
The net effect of a Biden win would therefore be a fall in the US's ROIC, which given the mix of easy monetary and budgetary policies would probably cause the US dollar to fall sharply against the euro.
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