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Who Will Be the Fitter President?

The first US Presidential Election debate is scheduled to take place on Thursday, 27 Jun 2024 at 9 pm ET on CNN.


The biggest question on voters’ minds will be - who will make the fitter President?


This isn’t just about the candidates’ age and health. But about leadership and policies for the economy.


Both candidates are quite unpopular by historical standards. People are tired of high prices, and high interest rates.


As we’ve been saying, the American economy has experienced a K-shaped recovery - where the top quartile of income earners have been faring well but the bottom 50%, not so much. But, elections count everyone’s vote.



Format of the Debate - What’s different this time?


Well, firstly it's very early for a presidential debate. It's the909 earliest televised debate since 1960.


Secondly, the debate is being organized and moderated by CNN, instead of the bipartisan Commission on Presidential Debates (CPD).


Most importantly, the rules have changed!

  • Unlike the previous events, the candidates will have their microphones muted except for when it is their turn to speak!

  • There will be no opening monologues

  • There will be no audience to react

  • There will be two commercial breaks but none will be allowed to meet their campaign team

  • No scripts or notes


This should help determine some of the health concerns people have been wondering about. But, more importantly, we may actually be able to hear what each of the candidates will be saying without interruption.



Policies


The focus will most definitely be on the economy first, and then foreign policy. We’ve heard some of the future policies that each of the candidates has discussed but, we will be looking for more clarity during this event.

We’ve now seen the policies of both candidates as Presidents. And in the minds of everyday Americans, Former President Trump’s economy was better by many measures because inflation was lower, interest rates were lower and taxes were lower.  And that may give Trump an edge, as he can play on the emotions of people.


But, he also has some extreme policies and the overhang of a criminal conviction.


On the other hand, President Biden will likely appear more composed and highlight the extremely low level of unemployment, all the stimulus measures, and the reshoring of US manufacturing and jobs through the various infrastructure spending policies.


Which brings us to spending.


Both candidates have spent enormous amounts of money in their terms, and the US now has to contend with a very high level of debt. Furthermore, both candidates have policies that are inflationary and call for an increase in fiscal spending.



The Economic Impact of Some of the Policies that we know About


While we’re looking at these policies from the perspective of each candidate, it’s important to remember that whether we have a Red or Blue Sweep matters. If one party wins but the Congress remains divided, we’re likely to see more muted policy implementation.

A unified government will bring far more fiscal spending.


We take a look at some of the high-level policies below and lay out some of the impacts that these policies may have. We’re assuming that these policies come to pass (which many of them may not).


Policy / Impact

Biden

Trump

Corporates

Less friendly; Higher Taxes

More friendly; tax cuts remain and further cuts proposed

Mergers and Acquisitions

Strict stance - cracking down on M&As

Friendly - more M&A will likely take place

Personal Taxes

Higher for higher income earners

Previous cuts remain

Tariffs

Existing tariffs remain and select protectionist measures e.g., China EVs / Semis

10% global tariff60% China tariff

Inflationary

Illegal Immigration

More legislative crackdowns that are slower and less effective

Stricter stance & direct deportation (although some of the views have been toned down in the last couple of weeks)

Energy

Pro clean energy and IRA spending continues

Pro fossil fuels - Drill baby drill to flood the market and reduce inflation

IMPACT



Economic Growth

Likely lower

Somewhat positive

Unemployment

May remain low because immigration continues

May spike due to immigration policies and cause a wage spiral

Inflation

Mildly inflationary

Inflationary

Fed Policy

May be able to follow the plan of 4 cuts in 2025

May not be able to cut as much as expected

Currency

Moderate USD

Higher USD

Equities

Lower Equities Prices

Higher Equities Prices

Rates

Still high rates but moderating

Higher rates


Immediate Market Impact


We want to watch long-end yields right after the debate. We may see a spike if the debate doesn’t go well in terms of reducing some of the concerns around inflation and a slowdown in growth. While this could put pressure on the market, Friday’s PCE data may reverse some of that. Nevertheless, the general uncertainty may start to rise.



Thus far, volatility leading up to the elections remains significantly low. In fact, we're also seeing volatility actually increase after the election, meaning the markets may see some pressure at that point. This is unusual as most of the time we see the market rise after the election.


It would seem that the market is more fearful about what's to come right after, regardless of who wins. And that part is not surprising seeing as how we may see some conflict about the election outcome.


Conference Board Consumer Confidence reading slipped again this month. According to analysts, July is usually the one to watch ahead of Presidential elections. This time around we may see the results of the first debate baked in as well.

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