Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 381

The 2020 US presidential elections

  •   Various
  •   28 October 2020
  • 1
  •      
  •   

What you need to know about the 2020 US presidential elections

Daniel Morris and Mark Allan

The elections take place on Tuesday, 3 November 2020. Let’s first remind ourselves of the US political structure.

US Government 101: Congress

The United States Congress, the legislative arm of the US Government, consists of two bodies: the Senate (upper chamber) and the House of Representatives (lower chamber). Passing legislation requires the consent of both the House and Senate and the agreement of the President.

Today, Congress consists of 100 senators (two from each state) and 435 voting members of the House of Representatives. The number of representatives a state has is determined by its population.

On 3 November 2020, all 435 seats in the House of Representatives, 35 of the 100 seats in the Senate as well as the office of President of the United States will be contested. In addition, elections will be held for 13 state and territorial governorships, as well as a number of other state and local bodies.

The current situation

Democrats have held a majority in the House since the 2018 elections, while Republicans have controlled the Senate since the 2014 elections.

The Democrats enter the 2020 election with 232 of the 435 seats in the House to the Republicans’ 196, giving them a sizeable 37-seat advantage. The Republicans hold the Senate by a 53-47 margin.

Control of both the House and the Senate: a Democrat clean sweep?

To enact sweeping change, the next administration would need to have a working majority in both the House and the Senate. This is particularly true given the current divided and very partisan political climate in the US.

At time of writing, Democratic candidate Joe Biden leads President Trump by around 10% in national opinion polls. In addition, the Democrats are clear favourites to retain their majority in the House. It would be a huge surprise if they do not do so.

It is control of the US Senate that is most tightly fought over in this election.

The 2020 contest for the Senate: down to a few states

This year, the Republicans have to defend 23 of the seats up for election, compared to 12 for the Democrats.

Theoretically, to gain control of the Senate, the Democrats need to win a net four seats (or three if Joe Biden wins and Kamala Harris becomes Vice-President and chair of the Senate, with the ability to cast a tie-break vote).

In our view, it is likely that the race for control of the Senate will come down to key, or 'swing', states: Arizona, Colorado, Maine, North Carolina, South Carolina, Iowa, Georgia and Montana.

We agree with the consensus view that the Alabama Senate contest is the only likely opportunity for Republicans to reclaim a seat from a Democrat.

We (and the consensus) anticipate that the Republicans will win Alabama (in a special election contest in 2017, the Democrats won Alabama for the first time since 1992, defeating a scandal-ridden Republican candidate).

Economic policy

Although millions of people have already voted, there is still time for the race to change dramatically. However, absent a meaningful shift in public opinion, a clean sweep for the Democrats with Joe Biden in the White House and Democrats controlling both the House and Senate looks likely.

That outcome would open the way for substantial fiscal stimulus.

In our view, it is quite plausible that a Democratic clean sweep could lead to fiscal stimulus of as much as USD2.5 trillion in the next 12-18 months – that equates to around 10% of US GDP. By way of comparison, the tax cuts President Trump enacted in 2018 represented around USD1 trillion over five years.

Exhibit 1 below summarises what we see as the probable implications of Republican or Democrat control of the White House and Senate for US fiscal policy and the outlook for monetary policy after the elections.

In a nutshell, the sort of very significant fiscal stimulus that a Democratic clean sweep could bring may increase growth, and possibly generate a little more inflation in the US. 

Daniel Morris is Chief Market Strategist and Mark Allan is a Senior US Economist at BNP Paribas Asset Management. The information published does not constitute financial product advice, an offer to issue or recommendation to acquire any financial product. You will need to seek your own advice for any topic covered in the article.

This article was first published on 13 October 2020 on Investors’ Corner.

 

Five ways the US election could impact investments

John Ma and Jason Epstein

The stakes are high for a country that has been grappling with the COVID-19 pandemic, social unrest and an economic crisis.

Before the country heads to the polls, First Sentier Investors invited two of its US-based investment experts to discuss the potential impacts of the election.

John Ma, Head of Investments, North America, Unlisted Infrastructure and Jason Epstein, Senior Portfolio Manager, Co-Head of High Yield, from First Sentier Investments, shared their insights.

1. A ‘Blue Wave’ win could spark a progressive policy push

As polls are predicting a Democrat win is more likely, this outcome is mostly priced into markets already, Mr Epstein said. What’s more difficult to predict is the scale of such a win. If the Democrats gain a majority in the Senate, they will have more scope to make changes.

“A so-called Blue Wave, where Democrats take back the Senate, could lead to a more aggressive push of their policy priorities. Some of the policy areas already flagged in Biden’s campaign include tax rates, healthcare, infrastructure spending, climate change policy, education and housing.” 

2. Stimulus funds will flow freely - regardless of the winner

It’s clear that boosting the flagging economy will be a priority for the new President – whoever it is.

Mr Epstein said, “There will be a tremendous level of fiscal and monetary stimulus, combined with the prospect of a new stimulus bill and the idea of a Fed ‘put’ for the foreseeable future.

“The real question is how sustainable that approach is. Will it continue to underpin markets, or is there a breaking point? There are also questions about if the US Dollar will retain its place as the leading reserve currency.”

3. China relations remain under pressure

In a break from past Democrat administrations, Biden has indicated he will maintain Trump’s tough stance on China.

“A tense relationship with China is likely to be the new normal, regardless of who’s President. Biden is looking to make the US competitive with China and to bring jobs back to US in areas such as automotive manufacturing. The goal is to have strong domestic production capabilities that reduce their reliance on China,” Mr Epstein said.

4. Infrastructure will remain a local affair

Mr Ma said it’s important to recognise that the infrastructure market is predominantly under state and municipal control, rather than federal.

“The White House has less direct ability to influence outcomes in the infrastructure sector. While funding can be allocated to the states at a national level, it’s the states and cities who mostly choose how to deploy the funding. As such, the election is unlikely to have a big impact on specific infrastructure projects.”

It is possible, however, that governments prioritise short-term job creation.

“In the wake of the 2008 recession, Federal stimulus funds were focused on ‘shovel-ready’ projects that would create jobs immediately. It was a missed opportunity for bigger, more ambitious projects. Hopefully we don’t see the same phenomenon play out this time,” Mr Ma said.

5. Democrats would give renewables a boost

One area of clear differentiation between Biden and Trump is the Democrats’ emphasis on renewable energy.

“The more progressive elements of the party put forward concepts like the Green New Deal during the primaries season, and this has informed Biden’s policies.

“It’s likely Biden would be a net positive for the renewable energy sector, which is already experiencing strong tailwinds. While power generation is controlled locally and regionally, a Democrat administration is likely to put an emphasis on clean energy through levers like tax credits,” Mr Ma said.

 

John Ma is Head of Investments, North America, Unlisted Infrastructure and Jason Epstein, is Senior Portfolio Manager, Co-Head of High Yield at First Sentier Investors, a sponsor of Firstlinks.

These views are general information and do not consider the circumstances of any individual.

 

RELATED ARTICLES

MFS Investments: Blue wave fails to reach shore

Capital Group: What the U.S. election means for investors

Investment implications of Trump presidency

banner

Most viewed in recent weeks

11 ASX dividend stocks for the next decade

What are the best stocks to own that can pay regular dividends and beat indices on a total return basis in the long-term? Here is our list of 11 ASX-listed companies that could help investors achieve these goals.

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

Time to smash the retirement nest egg - but how?

For decades, governments told people to save for retirement, then hold onto their nest eggs. Now, they're concerned that retirees aren't spending enough. How can we encourage reasonable spending patterns in retirement?

The greatest investor you’ve never heard of

Jim Simons has achieved breathtaking returns of 62% p.a. over 33 years, a track record like no other, yet he remains little known to the public. Here’s how he’s done it, and the lessons that can be applied to our own investing.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Welcome to Firstlinks Edition 552 with weekend update

Being rich is having a high-paying job and accumulating fancy houses and cars, while being wealthy is owning assets that provide passive income, as well as freedom and flexibility. Knowing the difference can reframe your life.

  • 21 March 2024

Latest Updates

Retirement

The challenges of retirement aren’t just financial

Debates about retirement tend to focus on the financial aspects: income, tax, estates, wills, and the like. Less attention is paid to the psychological challenges of retirement, which can often be more demanding.

Strategy

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Taxation

The mixed fortunes of tax reform in Australia, part 1

While there have been numerous tax reviews at the Commonwealth and state levels, most have not resulted directly in substantive tax reforms. This two-part series looks at that history and explores the pathway forward. 

Investment strategies

America, the world's new energy superpower

The US has become the world's new energy superpower, combining production, technology and capital in a way never previously achieved – a development sure to have global implications for decades to come.

Investment strategies

Could Korean corporate reform trigger a Japan-style market rally?

Corporate governance reforms in Japan have helped spur a 45% rise in the share market over the past 12 months. Korea looks set to follow the Japanese reform playbook, and may be poised for a similar bounce.

Property

How AI will transform the real estate sector

The real estate industry, traditionally characterised by its cautious adoption of new technologies, is now at a pivotal juncture. The emergence of AI promises to fundamentally change the way we live, work, and play.

Investment strategies

Charitable giving and tax deductions

With impending Stage 3 tax cuts incentivising taxpayers to bring forward future tax deductions while tax rates are higher, it’s a good time to explore how to bolster your tax savings and community impact through structured giving.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.