10 July - update from our investment partner

  • 10th July 2020

As the Presidential election approaches, markets are trying to weigh up the risk of Presidential change.

What has happened

Markets wobbled yesterday after the US Supreme Court ruled that a New York grand jury could receive President Trump’s tax records. In reality these records are unlikely to become public before the November election, but the real source of volatility was the latest coronavirus data.

US case growth continues

US new case growth moved over 80,000 daily cases for the first time during the pandemic. The pace of growth in the most affected states is showing some tentative signs of slowing, suggesting that steps taken, such as mandatory face coverings, are beginning to work. There was also an increase in the level of fatalities, but this remains below the pace of the first wave. In terms of the hot spot states, Florida reported 120 deaths and California 141 deaths. On a per capita basis the daily fatality rate in the US, as a whole, is 2.8 per million which is considerably lower than the figures seen in March and April. The risk remains to the upside here, but a continued lower rate of fatalities growth will allow the broad reopening of the US economy to continue.

What would a Biden Presidency look like

At the start of the year financial markets were fairly confident that Donald Trump would win a second term given his polling figures and the historical voting bias towards the incumbent. This has shifted markedly as coronavirus and civil unrest has upset the political landscape. With the betting markets implying a c. 60% probability of a Biden victory, investors will start paying more attention to the Democrat’s policies. Yesterday we saw the first part of his economic plan which was launched under the banner of “Build Back Better”. This involved spending on new technology projects as well as manufactured goods, the latter specifically targeting the core Trump vote. This would be financed with a partial reversal of the Trump tax cuts that we saw in 2018.

What does Brooks Macdonald think

As the Presidential election approaches, markets are trying to weigh up the risk of Presidential change. Historically markets have favoured the incumbent as they generally abhor uncertainty. Whilst Joe Biden would likely herald higher taxation and a tougher position on healthcare pricing there may be a thawing of US/China tensions which have added significant volatility to market levels over the last two years.


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Information contained within this article is not a personal recommendation of Forrester Boyd Wealth Management. The wording in this article is not to be construed as an offer or advice. We recommend you seek advice concerning suitability from your investment adviser.