Comment on US elections
Peter Garnry, Head of Equity Strategy at Saxo:
1. Trump will soon be confirmed as the Republican nominee, would his re-election and America-first approach be something that could potentially spook the international markets?
“Our view is that markets are not as easily spooked by Donald Trump compared to eight years ago. The market has known for a long time that Trump would be the Republican candidate. At this point, it is still a bit unclear what it means except for a tailwind for Europe’s defence industry and headwinds for Asian manufacturers.”
2. Trump shows little support for financing Ukraine if elected, which would strengthen the prospect of Russia triumphing in their war. How much would such an event impact European investments, with grain supplies and energy likely to suffer further?
“Trump’s comments about Ukraine and NATO should be taken seriously, but as we know from his first term, he often sets the negotiation stage with harsh comments before settling on a pragmatic solution. We don’t expect the US to pull out of NATO, and his comments have already accelerated Europe’s own defence plans, which will put Europe in a very different position when we get to November.”
3. For the markets, who is the safer option as next president, Trump or Biden, and why?
“It is too early to say how the market thinks about this. Last time, the US economy was in a position for Trump to launch a big economic supply-side policy, which was well received by the market. However, eight years down the road, the fiscal position of the US economy is very different, and there is little room for Trump-style policies of the past without jeopardizing the trust in the USD. This is true for Biden as well. Both will inherit an economy with little room on the fiscal side.”
4. Some argue that both Biden and Trump are too old to be president again, would a younger candidate make for a safer option for the markets?
“The market will likely not care about this. The system is robust enough to handle any adverse outcomes from age. But regarding this subject, and the fact that the election will give either candidate his second term, this election will mark the end of a political era in the US, and new candidates will spring forward ahead of the 2028 election.”
