There could be some contestation after the US results and that could mean volatility in the market. Analysts say there is a Trump trade. But it helps us understand the likely outcomes and their impact. Do you have a Republican sweep or a split congress and will that make the markets happy?
Arnab Das: First, I will comment on whether this is a disputed election. I will only say a few of them. There are polls that show this or that candidate is ahead at this point. Almost everything is within the margin of error. So polls are generally not a good guide. There is one very interesting poll for the state of Iowa that shows Harris and I have a three or four percentage point lead over Trump in a solidly red state and the I poll is an important outlier. It has created a lot of discussion and a lot of soul-searching across the US because the polls have correctly predicted results that were fairly close by the margin in each of the last four presidential elections.
So you might as well make a case that it’s not going to be close and that’s another way of saying we don’t know what’s going on because there’s a lot that hasn’t happened in this election. Joe Biden resigned. President Trump is running again after leaving office for the first time since Grover Cleveland. So, a lot of things are very new, very different.
For the market, there are some Trump trades because the polls are swinging against him, as a result of the possibility of the election swinging too much for him recently until the closing days of the election and at that time there is a possibility. has really accelerated all the election betting sites prediction market and the original Trump trade, the pro Trump trade takes the form of a stronger dollar, higher yields and a steeper yield curve because the policies of Trump certainly help if there is a clean sweep.
But even if it’s not a clean sweep, the policy will be inflation or reflation or stagflation, maybe, depending on how it all ends. And the narrowing of the polls, the narrowing of the betting odds has taken some out of the market.
Past election data has shown that the market has had positive returns, although there may be some volatility in the near term. You talk about the influence of the presidency of Donald Trump, but there will be continuity of policy if Kamala Harris is elected to power because we just listened to her bite and she said that she will present a different leadership than President Biden. In that scenario, what do you think?
Arnab Das: The situation of the Congress is very important. In general, what you can say is a little oversimplified, but in general terms, the President needs Congress on his side to make something very different when it comes to domestic policy and more so when it comes to foreign policy. So, national security, trade and immigration and other areas. Of course, there are obstacles, checks and balances everywhere you look, but the difference is vast. It would appear that Harris is much less likely to have a clean sweep than Trump, but even Trump is not very likely to have a clean sweep. So, the Senate seems likely to turn from Democratic control to Republican control. The House is probably a bit of a toss up, but it’s probably more likely to go flip to the Democrats. Of course, if Trump wins, there’s some chance he’ll have a clean sweep. Now, how do you translate that into policy and into the market? Although Harris tries to differentiate himself from Biden because he has to be his own president, his own type of leader, he also has a good continuity in many aspects and there is some degree of continuity between Trump and Biden as well. . But it’s true that if we get President Trump, it will disturb the whole world and probably disturb the US because this point is more latitude. foreign policy and as we all know, the only consistent thing about Trump’s policy is that he is protectionist and instead of isolationist, he is unilateralist.
Harris is more multilateralist, more rules-based, while Trump likes to signal when he faces the rules and disrupt them. So, in that way, Trump’s presidency will lead to the American market first. They will do things to try and boost the growth rate in the US, try and control the inflation rate in the US and try to re-shore and re-industrialise. Harris is probably going in the same direction, but more carefully and more slowly.
What about China’s prospects? In general, the policy of the United States has been unified, because both sides have an anti-China attitude. Trump’s side is more hawkish, but will his approach be more confrontational, more competitive or cooperative? And based on that approach, what is the impact on India and China plus one?
Arnab Das: Before I come, I must also speak on the question of the Electoral College. It is important to recognize that the United States is not a pure democracy. It is a republic. That may sound like a difference without a difference. But the difference in this context is that republics protect or try to at least protect small groups and minority groups against the majority so that they are not the majority. Whereas in a democracy, you really have majority rule and this is the core function of the Electoral College besides elitism is also part of the logic of the Electoral College.
But the underlying political logic is to protect small groups, small countries against the majority of large countries and countries with large populations and that is exactly what is happening with President Trump. President Trump has taken a divide and conquer strategy, going for the Electoral College and ignoring or even going against the majority vote. To do that, he has exploited the popular polarization of the country and thus he has been able to win the Electoral College while losing the popular vote.
Is the China factor and China plus one push and will it gain more momentum?
Arnab Das: Both presidents will be America’s first orientation and push China. The difference will be that President Trump will approach significantly, if not primarily through tariffs. He calls himself a rate man all the time. Whereas with President Harris, you’re going to see tariffs that are more targeted than tariffs across the board and a lot of non-tariff barriers that are more targeted at national security issues.
Whereas with Trump, it will be more generally about the economy and about trade with an emphasis on the military, industry, national security that is important there. Also with President Trump, it’s not just about China. This will be the case with many of the US’s trading partners, especially countries like the Euro Zone and Japan, parts of the world that have large surpluses with the US. India is probably the most hedged large economy because India does not have a goods surplus with the US. It has more than a surplus of services and that has been a bit of a problem. Of course, there is an increasing closeness between the US and India due to China, which will continue.
