Donald Trump’s surprise victory in 2016 was preceded by a nice run-up in markets, and the same thing seems to be happening right now. The market’s continued rise appears to point to an underlying confidence in the economy, and the more it goes up, the more out-of-touch Democrats’ negative attacks on the US economy and society may seem to voters. “The markets are starting to embrace the idea that Trump wins reelection. Most of the people in the markets don’t like him personally, but they like his policies”, said a veteran fund manager at AGF investments.
FINSUM: We have to agree with the assessment that a continued rise in the economy and markets would not be favorable to Democrats’ chances.
Will the US and China make a substantial trade deal? That is a trillion Dollar question for markets. Some argue that China may defer doing any deal and take the risk that Trump does not win the election, effectively letting the clock run out. However, an astute view is that China might be desperate to do deal while Trump is still in office. The reason why is that if Trump were to lose to a Democrat, who in all likelihood would be a more conventional US president that takes a much friendlier approach with international allies, then China would be in a very compromised position. A Democratic president would likely approach the Chinese trade deal with a much more united front of trade allies, which would be a worst case scenario for Beijing.
FINSUM: The irony of this is that Trump has been by far the hardest president on China in memory, but at the same time, the Chinese have the best chance at a good resolution by dealing with him.
It is getting to be the time of year when everyone is trying to predict next year’s election. A lot of polls show Trump is trailing, which has given Democrats hope and some comfort. However, a new chart published by Goldman Sachs offers a different view. The bank analyzed historical approval ratings against economic data heading into elections and found that when the economy is healthy, that factor outweighs approval rating. Goldman concluded that should the economy stay on decent footing, Trump has a clear path to victory.
FINSUM: This makes a lot of sense to us and we think it offers a more realistic picture than more minutely-focused opinion polls.
Bernie Sanders has just made his big pitch to America’s Millennial generation. The candidate has vowed to eliminate all student loan debt for both undergraduates and grad students, and make all future tuition free. To fund the $1.5 tn write-off, he is planning a new tax on stock, bond, and financial derivatives trades which he forecasts would bring in $2.4 tn over a decade. One of the things that differentiates this plan from others, like Warren’s, is that it will eliminate all debt, not just that of the lowest income borrowers.
FINSUM: This is an interesting plan from a strategic perspective because it not only appeals to the left and the young, but also the richest of the young because it would eliminate all debt regardless of income. This point has brought criticism from some Democrats.
The 2020 presidential election is still about a year and half away, yet a large number of investors have already made changes to their portfolios based on potential outcomes. Some 40% of investors say they have adjusted their portfolios because of the upcoming election, according to a recent survey. The reality is that investors are worried about a Democratic sweep of the presidency, House, and Senate, which could mean a serious rollback of Trump-era policies, including tax cuts. “If Biden continues to poll this well into the beginning of next year ahead of the primaries, he is gonna start to have some negative effect on the market”, says Tony Roth of Wilmington Trust.
FINSUM: We can’t help but agree with that last assessment. That said, we think negative effects will be slow and steady, not sharp moves.