There could only really be one subject for this week’s column.
At the time of writing on Friday it looks almost certain that Senator Joe Biden will become the 46th President of the United States, taking the office for the Democratic Party.
While the situation, widely expected, looked uncertain on election night, the impact of subsequent postal voting (the Democrat support tended to use absentee mail ballots rather than voting in person) has swung it round in Biden's favour.
Key ‘rust belt’ states, including Wisconsin and Michigan, returned to the Democrat fold, while Arizona, which has been Republican for over 70 years, turned ‘Blue’.
At the time of writing, it looks as if Georgia, Pennsylvania, and Nevada will also go Biden’s way.
President Trump will in all likelihood be litigating in several states, but while there may be the odd recount, this is unlikely to change the final result. The position may be unclear for a few weeks, but it is likely that when the Electoral College votes on December 14th it will be for Biden.
The real story is that the ‘Blue Wave’ failed to occur, and that the swing to the Democrats, and away from the Republicans, did not materialise.
The Republicans look as if they will hold on to the Senate, while the Democrat majority in the lower house, or House of Representatives, is actually reduced rather than increased as expected.
The Democrat lead as predicted by the polls looks to be massively overstated. Going into the election, even as recently as Monday, the lead nationwide was supposed to be well into double digits. In reality, Joe Biden has polled 2-4% more of the popular vote than President Trump.
The upshot is that, where we might have been talking about what a ‘post-Trump’ world would look like, the new world may not be so different from the old one. And it is certainly conceivable that Trump could run again in 2024, when he would be about the same age that Biden is at present.
Normally, at this point in the cycle, the outgoing President is referred to as a ‘lame duck’, on the basis that he has little time, and little opportunity, to achieve much in the way of policy.
However, at present it seems appropriate to wonder if Joe Biden will be a ‘lame duck’ President over the next four years.
It seems highly unlikely, at this stage, that he will have the votes or support to put through any of his campaign objectives, from $2 trillion in Green infrastructure spending, to increasing the minimum wage, to ‘packing’ the Supreme Court, to adding on extra states like Puerto Rico or the District of Colombia, to increasing corporate taxes back to previous levels, or to taking away the Senate powers of ‘filibuster’.
He will likely have to resort to ‘executive orders’, whereby the President can bypass Congress in the implementation of policy, as Obama and Trump did. He may even have to include some Republicans in his Cabinet, which would not go down well with the left wing of the Democratic Party.
So from a stock market point of view, there are clear advantages in the stalemate, or gridlock, which has resulted. Stalemate was the condition of the latter years of the Obama administration, and the second two years of Trump’s presidency, all of which saw the stock market performing well. This may be the case again.
At the same time, Joe Biden’s more conciliatory stance towards China, NATO and Europe, and more ‘internationalist’ approach to politics will go down well in global diplomatic circles.
In the short term, a Biden Presidency may not be great from a UK perspective, with the UK’s chances of getting a free trade deal with the US better under Trump than Biden. However, the outlook over this may improve with time.
The US stock market is up 7.5% over the past week. There were fears that a delayed result could result in a stock market rout, but the opposite has been the case thus far.
As we saw at the 2016 election, worst fears realised don’t always result in the movements in stocks anticipated.
From an investor’s point of view, the situation looks reasonably positive at present.
Disclaimer: The views, thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security.