Never has the gap separating Republicans and Democrats been so wide, and the upcoming presidential election could split the country even more.
However, future Administration policy is likely to be determined more by the composition of Congress than by the eventual victor of the 3 November 2020 contest. A united Congress (with the same party holding a majority in both Senate and House) will give a clearer insight into new government policy whereas a divided Congress (different majorities) could generate greater uncertainty.
A united Congress will make the domestic and international consequences of both candidates’ programs more immediately clearer to investors. The new government will also be in a position to provide a more clear-cut and massive response to the economic crisis (even if Republicans and Democrats would both go about this in their own different way) and have all the tools it needs to kick-start growth. On the whole, the country will have a clearer sense of direction: a greener economy and increased taxes with Democrat Biden, and a resurgence of tensions, both internally and externally, with Republican Trump.
Should, however, Congress be divided, the next president will only be able to implement part of his program. Potentially the most negative outcome is a Democratic presidential win with a divided Congress, as Republicans could oppose part of the economic recovery program (higher expenditure financed by higher taxes). If, however, Donald Trump carries the day, a divided Congress could, thanks to its countervailing power, prove more moderate.
If Donald Trump comes up trumps
As Donald Trump’s electoral program is much the same as in 2016, his domestic policy will remain unchanged if he is (re-)elected: tax cuts, deregulation, immigration quotas and oil industry- and healthcare sector (in particular)-friendly legislation.
His foreign policy, on the other hand, will remain shrouded in uncertainty for as long as POTUS remains as unpredictable as during his first mandate. The only (almost) sure thing will be even less multilateralism and stricter China measures.
This will negatively impact China, emerging market and European equities, while, in the US, energy and healthcare sector players should benefit.
If Joe Biden aces it
A Joe Biden victory will destabilize the domestic US market more than it will the rest of the world. Economic stimulus measures will be clearly undertaken but applied differently: tax hikes, higher minimum wage, capex, and greater priority to climate change and sustainable development. Healthcare sector deregulation would be stopped in its tracks.
The US could also repair its relations with the outside world, ushering back in multilateralism and renewing the economic and commercial dialogue with Europe in particular.
Those sectors set to benefit most from a Democratic presidency are those linked to infrastructure and transport, renewable energies and, more widely, the thematics linked to sustainable development. The losers: the healthcare and energy (oil & gas) sectors.