Executive summary
- US election uncertainties are high because policy outcomes are difficult to call
- Democrats are likely to offer greater fiscal stimulus;
- Republicans could prove more hawkish on foreign policy
- Regardless who wins, additional fiscal stimulus is likely if the US economy continues to struggle.
- More importantly, US fiscal austerity is a long-way off, and so any pull-backs in markets could be buying opportunities.
- With the re-election of President Trump, US equities are likely to continue to perform well, while the pressure would remain for bonds
to slowly sell-off over time. Under Biden, US equities could perform stronger than otherwise given the significance of his fiscal stimulus plans, and his more dovish approach to US foreign policy (which can benefit the performance of US multinationals). - The US dollar could be stronger than otherwise if global risk aversion increases with the re-election of President Trump. In addition,
confidence in strong performing Asian equities could also be tested over time as US foreign-policy settings would likely remain hawkish, especially relations with China.