US election: Trump 2020?
The Trump 2020 campaign is well underway – and early indications are that it will be just as divisive, controversial and unpredictable as the election which brought him the presidency back in 2016.
When it comes to his chances, the only thing commentators can agree on is screenwriter William Golding’s famous maxim: ‘Nobody knows anything.’ And plenty could go wrong for the President before the Democrats are due to choose their candidate in June 2020.
Runners and riders
They’re certainly fielding some strong names among their 25-strong roster of Presidential wannabes, with inequality being the key policy focus. Barack Obama’s Vice-President Joe Biden brings experience and the name recognition factor but few concrete policies, while left-leaning politics veteran Bernie Sanders isn’t afraid of pushing home a strong anti-Trump message, and a promise to implement a $15-an-hour minimum wage.
Massachusetts senator Elizabeth Warren, long-time inequality campaigner, has been making headlines with her top-line policy of cancelling all student debt, and performing strongly in debates. And former prosecutor Kamala Harris has also been making waves with her debate performance in Miami, as well as promising to legislate against pay inequality.
So how could a Trump re-election affect the markets? The President himself has tweeted that if he loses, Wall Street will suffer ‘a Market Crash the likes of which has not been seen before’. But there’s no precedent for that, according to an analysis of stock market movement around presidential elections, Morning Consult, which looked at every election since Woodrow Wilson in 1928.
It found that surprise seemed to be the biggest negative factor, with the S&P dropping 5.27% after Obama’s election in in 2008, and 4.42% upon the election of Franklin D. Roosevelt in 1932. The markets certainly didn’t do anything particularly wild following Trump’s 2016 victory, rising just 1.1% – that’s less than Reagan in 1980 (1.77%) and Clinton in 1996 (1.46%).
So chances are that it will be business as usual on Wall Street if he’s re-elected. But how might the markets react to one of his opponents winning the White House? That depends who it is – and how much of a surprise their election would be.
Both Warren and Sanders have been open about their determination to push through policies such as the minimum wage and higher taxes on the wealthy: the markets aren’t going to like that. Billionaire Leon Cooper recently told CNBC that the markets are at risk from a ‘far-left candidate’, and added that: ‘Bernie Sanders, in my opinion, doesn’t have a clue.’
Warren, however, is very different from Sanders in her view of capitalism. She has emphasised that she believes in markets, and consequently is winning fans in high places. David Schamis, chief investment officer of Atlas Merchant Capital, said in the Los Angeles Times that he’d be happy to support her. “I think she is smart, hardworking, responsible and thoughtful. And I think she thinks markets are important.”
And what might a Trump re-election do to the price of gold? As it’s a safe haven, it goes high when the geopolitical situation is unstable. Trump’s certainly good at keeping the world guessing – note his recent spats with North Korea and Iran – and there’s no indication that his second term would be any calmer.
But as Stefan Gleason, writing in Money Metal Exchange, points out, Trump’s election also ‘lit a fire under the stock market and put something of a damper on retail demand for physical precious metals in the United States.’
However, the election of a Democrat certainly wouldn’t usher in a period of tranquillity for gold, either. Investors may well regard an avowed socialist like Bernie Sanders as far more of a risk to the economy, and pile into gold, sending the price up.
So while the presidency remains up for grabs, one thing is certain. Gold remains a smart choice for investors who like to keep their options open – whoever ends up in the Oval Office.
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Important disclaimer: this document is not an official research report and the views expressed in it are those of the authors. The authors are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000, therefore, this does not give rise to rights to claim compensation under the Financial Services Compensation Scheme.