Could Corona hand the Presidency to Biden on a platter? What happens then?
Yesterday I showed you this chart here, which worryingly seems to show new Corona Cases getting out of control in the US.
As I said, it’s a misnomer to call this a second wave. It’s actually just the spread of the first wave into the southern states. Call it The Southern Wave.
But whatever the case, it seems to be getting out of control, and that has some big political implications, and I wanted to think through some of those today.
First, Trump’s approval rating is falling quickly, and that seems fair enough. Protecting the American population is the number one job of the American President. If you can’t do that, it’s not surprising people are getting angry.
Trump’s approval rating has been lower, but the runway between now and election in November is pretty short. Trump really needs to be able to put Corona Virus behind him.
If it’s a big issue come November – if it’s still an issue – it’s hard to imagine the American people are going to be forgiving.
And even though Joe Biden has all the charisma of a freshly unearthed corpse, his polling numbers are on a break-away:
And betting odds have clearly turned in his favour:
Now, we should take this with a grain of salt. The polling numbers were hopelessly wrong in 2016. But still, Trump was untainted fresh-blood back then.
There’s a good chance he’ll be going into the election with the blood of the Corona Virus on his hands.
That’s going to be hard to get off.
And so what would a Biden presidency mean?
There’s a lot of unknowns there, but Biden has set up tax policy as a clear policy difference.
Wall Street’s not happy:
Boston-based Christine Todd, who is head of US fixed income for Amundi, Europe’s largest investment manager… put out a special bulletin showing that while Biden might be better for markets than Sanders he would still dramatically reduce US share values, particularly when combined with the higher COVID-19 infection rates.
…Todd and Amundi calculate that Biden’s tax increase agenda would reduce the S&P 500 earnings estimate for 2021 by roughly $US20 per share, from $US170 to $US150. As a rule of thumb, every percentage point change in the effective corporate tax rate should change S&P 500 earnings by 1.2 per cent, or $US2 per share.
Todd and Amundi concentrated on corporate taxation but the Biden agenda also has a range of increased taxes for higher income individual Americans…
The money raised by the higher corporate and individual taxes will be directed towards increased access to healthcare and support minority communities through a new affordable housing program. There will also be substantial investment in infrastructure.
We are looking at a different America under Biden and one that will not be anywhere near as favourable to the share market.
Cry me a river, Wall Street.
It’s not the President’s job to juice share markets.
And long term, a more stable tax base and increased infrastructure investment are good news for the American economy.
But still, if we do get a V-shaped recovery in time for November’s elections, there’s every chance that a Biden victory will send stock market’s south again.
In my mind, property is the clear winner there. Funds will pivot out of equities and into property, across the world.
And depending on how much of a mandate Biden gets, it could be substantial.
But four months is a lifetime in politics, and I wouldn’t underestimate the Donald.
But even still, if that case rate gets away from him, I don’t think there’ll be any saving him.