“Although November 5 is only six months away, the return match between President Biden and former President Trump is still too uncertain to predict,” underline three managers of Amundi Investment Institute, Mahmood Pradhan, head of macroeconomics, Anna Rosenberg, head of geopolitics and Paresh Upadhyaya, head of rates and exchange rate strategy, in a note dedicated to the American outlook.
The managers first highlight the convergences of the two candidates. Both programs could lead to higher deficits, they estimate, “which would drive up debt and Treasury yields.”
“Both candidates would pursue protectionist trade policies,” say the managers, emphasizing that while Biden “could broaden the range of targets,” Trump “intends to protect basic American industries, which could lead to trade conflicts with allies in Europe and Asia.
Believing that the two candidates should also implement “stricter” migration policies, the managers note that “Trump’s threats to deport undocumented immigrants would however have a significant negative effect on labor supply and wages.
The two candidates then of course present significant differences.
Fiscally, Trump would favor the extension of his 2017 tax reform (Tax Cuts and Jobs Act), while Biden “would try to reduce taxation on low or modest incomes and increase that of high incomes and businesses”.
American energy policy would aim, under Trump, at self-sufficiency and national oil production and under Biden “support for clean energy initiatives”.
Finally, the managers believe that equity markets could perform better under a “divided government”, where the president’s party does not control Congress, because it “would reduce the likelihood of controversial tax increases and trade policies aggressive.”
Source: AOF
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