The night is always darkest before The Donald

ECCLESHALL, STAFFORDSHIRE – Prior to his presidency, way back in 2015, Donald Trump tweeted – amongst many other things – that it is “often to your advantage to be underestimated”.

(Not “misunderestimated” of course – you’d have to ask George “dubya” Bush if that’s advantageous or not.)

If Trump still seeks underestimation, then a brief scroll through the headlines would suggest that he’s is exactly where he wants to be. There don’t seem to be many journos aboard the Trump-train. Quite the opposite in fact.

It’s almost – dare I say it – just like 2016.

If you’ve been reading Capital & Conflict for a while, you’ll know I think we’re in for four more years of The Donald. I’ve put my money where my mouth is – I made a bit of cash trading corn futures earlier this year, and have dumped all my winnings on a bet that Trump will keep the White House.

Maybe I’m wrong. Our managing editor Will Dahl thinks so – and he’s an American. He reckons Biden will triumph today, but he sent in some interesting “notes from the field” yesterday that make me think The Donald is doing just fine…

From Southbank Investment Daily, yesterday:

I’ve spent the last week in the US, hunkering down with a friend in North Carolina before driving up to D.C. last night.

You could feel the election on the highway, with hundreds of Trump/Pence yard signs over rural America, with the occasional Biden/Harris sign in the mix.

We even saw a Trump 2020 parade of Jeeps and Humvees, carrying billowing Trump 2020 flags. I later found out that those processions were taking place all over the US yesterday.

It had the feeling almost of a victory parade. Republicans by and large don’t believe the polls. “Trump will win by 50 Electoral Votes more than last time,” a North Carolina man told me confidently. The GOP seems supremely confident in the final week of the election, so much so that they’re unable to stop themselves from gloating a little.

Democrats by contrast are terrified. Thousands of them are working feverishly to oust Trump, spending hours phone banking for campaigns and even going door-to-door in the pandemic.

But almost all of them are unable to let themselves hope for that very outcome, with the trauma of Election Night 2016 still lingering.

It’s a strange situation. The party that’s trailing in the polls, by a margin that would imply a historic defeat, is already celebrating. And the party leading by landslide-level margins is bracing for a catastrophic defeat.

So with 30 hours to go, who do you trust – the mood, or the data?

Will is sticking with the data from the polls. But I’ll stick with the mood. I’ve never been a huge fan of polls, and I think their performance over the past five years have discredited them beyond redemption.

Meanwhile, on the opposite side of the US, another of our editors weighs in. Here’s Eoin Treacy’s take from California yesterday:

If we were to believe everything in the papers, the US presidential election is the most momentous political event in our lifetimes. They say that every four years, if my memory serves me. The big question is, what would really change for markets? There is really only one thing that matters: taxes.

If the Democrats get anything less than a clean sweep, the status quo will be sustained and taxes are unlikely to rise. Even if many commentators are willing to give that possibility some credibility, I am not at all convinced that the average American is about to vote for raising taxes in the teeth of a global recession.

The wild card this year is turnout. There has been such a strong movement to boost vote by mail and many people have a lot more time on their hands that the number of votes cast could be substantially higher than usual. That could be beneficial to either candidate. It could also mean that the Electoral College gives a very different result than the national popular vote. After all, if millions of additional people vote in California this year it will not change the number of Electoral College votes the state commands.

If higher taxes are less of a possibility, the mind immediately turns to the possibility of additional stimulus. Regardless of who wins we can expect there to be significantly more stimulus approved in the US. Many of the programmes to delay evictions and supplement unemployment benefits expire towards the end of the year. With millions of people depending on these programmes it would be political suicide not to prolong them until the lockdowns end.

Stim stim stim, juice juice juice. The true winners of today’s election over the pond will be those involved in the creation and administration of government “stimulus”. No matter who wins, the printing presses at the US Treasury and Federal Reserve will run so hot over the next several years that they should probably be used as a source of renewable energy. Make sure your portfolio doesn’t get burned.

I hope you enjoy tonight’s entertainment. I was planning on staying up all night to watch the results come in, but the announcement of the lockdowns has forced me to change my plans: early tomorrow morning, I’ve got a plane to catch…

All the best,

Boaz Shoshan
Editor, Capital & Conflict

Category: Market updates

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