Assessing the Potential Rematch between Biden and Trump: A Wall Street and China Analyst Perspective
The possibility of a rematch between President Joe Biden and former President Donald Trump in the 2024 U.S. presidential elections has captured the attention of Wall Street and China analysts. While predicting the impact of the election on the stock market, bond yield, and currency exchange rate is challenging due to various variables, analysts are closely examining the potential outcomes.
Goldman Sachs, a renowned multinational investment bank and financial services company, believes that the 2024 election could be a significant market event due to the policy differences between the likely candidates. Although historical data suggests that elections may not have an immediate impact on markets, the unique matchup between two well-known figures like Trump and Biden could result in earlier market reactions.
The dynamics surrounding the 2024 U.S. elections are unprecedented. The fact that a sitting president is trailing in the polls and a former president seeks reelection means that President Biden might implement measures to benefit himself, even if it requires compromise. Republican lawmakers may also be less inclined to announce new policy measures if the White House becomes open to significant concessions. This could provide Donald Trump with influence among Republicans, especially considering his significant wins in Iowa and New Hampshire.
The economic policies of the candidates remain uncertain. Donald Trump is expected to prioritize tax cuts, particularly for companies, while President Biden may attract support by proposing expansion supported by increased taxes on businesses and the wealthy. Another key idea that Trump might emphasize is a 10 percent tariff across the board. If he does so, it would indicate his intention to impose it if elected.
Analyst Ben Snider from Goldman Sachs suggests that while politics may not be the primary driver of stock movement in the coming months, some election-year equity market patterns are worth considering. Historically, equity returns have been slightly weaker in presidential election years, with earnings growth being a crucial factor. Additionally, fiscal policy, regulation, and global trade tend to have a more significant impact on returns in election years, although this tends to occur in the later stages of the election cycle.
The potential for a split control between the Senate and the House is another factor that analysts are monitoring. TD Securities predicts that Republicans may “recapture” the Senate, and Donald Trump could be reelected as president. This split control could have implications for policy-making and decision-making processes.
If Trump wins and makes his 2017 tax cuts permanent, equities markets might experience a significant boost. However, concerns about a renewed trade war with China could offset some of those gains. Tax cuts could also raise worries about rising budget deficits, impacting Treasury bond prices and raising the term premium.
The upcoming U.S. election holds geopolitical implications, particularly for U.S.-China relations. Bilateral ties between the two nations have been strained in recent years, and the return of Trump to power would introduce uncertainty. Both Democrat and Republican parties are expected to maintain a tough stance towards China, and tensions regarding Taiwan remain high. Trump’s previous trade conflicts with China resulted in the imposition of tariffs, and he has promised even more substantial tariffs if reelected.
The distribution of potential policy outcomes in the election suggests that volatility may be higher, according to Goldman Sachs. The significant differences in policies between Biden and Trump could lead to wider ranges of possible outcomes.
As Wall Street and China analysts delve into the potential impact of a Biden-Trump rematch in the 2024 U.S. presidential elections, it becomes clear that this election cycle is unique. The policies of the candidates, potential market reactions, and geopolitical implications make this election one to watch closely. While it may be too early to determine specific outcomes, the clarity on likely candidates this early in the cycle sets the stage for an intriguing and potentially market-moving event.
