Beginning in spring 2019, more than 20 Democratic hopefuls declared their candidacies to become the next U.S. president (POTUS). After the Super Tuesday primaries on March 3, 2020, only two candidates remained: ex-Vice President Joe Biden and Senator Bernie Sanders. The election of Biden or Sanders would mean something very different to futures market participants.
Impact of a Democratic 2020 Win
With the likes of Mayor Pete Buttigieg, Senator Elizabeth Warren, and billionaire Michael Bloomberg falling by the wayside in March, much of the presidential race’s ambiguity was removed. At this point, three unique perspectives are competing for the White House―the incumbent capitalist, a career centrist politician, and a self-proclaimed democratic socialist. Let’s take a close look at what a close look at what a Democratic victory in the 2020 General Election may mean to the live futures market.
Biden Emerges As the Apparent Nominee
Joe Biden campaigned from a pro-worker, unify America, progressive platform. Citing the need to “reinforce the Democracy and restore moral leadership,” Biden was an outspoken critic of big business. Below are a few of his economic-oriented objectives:
- Rebuild the middle class by allocating $1.3 trillion for infrastructure development over 10 years, $50 billion in the first year of the new administration.
- Move the U.S. to net-zero greenhouse gas emissions.
- Promote union growth and collective bargaining with corporate interests.
In addition to these talking points, Biden pledged to take a global approach to international trade concerning China: “China can’t afford to ignore half of the global economy if we’re united.”
So, what could futures market traders and investors expect economically from a Joe Biden presidency? Judging by the rhetoric, a rollback of 2018’s tax cuts, an end to Trump-era tariffs on China, and industrial carbon restrictions are a few policies that could impact sectors of the economy. Subsequently, these asset pricing trends may potentially emerge:
- Equities: If Biden wins the presidency, a short-term bearish correction is likely to hit U.S. equities products. In the longer-term, tax cut repeal, health care expansion, and union-first policies may slow growth on Wall Street.
- Safe-havens: A prolonged exodus to safe-haven assets such as gold and the Swiss franc are unlikely. Investors may favor a wait-and-see approach to portfolio management as Biden’s first term unfolds.
- U.S. dollar: Given the FED’s “unlimited QE” of the COVID-19 pandemic, the USD is likely to remain weakened well into Biden’s first term.
Following a strong collection of showings throughout the month of March and early April, Biden emerged as the clear-cut frontrunner in the race for the Democratic nomination.
Sanders Suspends Campaign
An Independent Senator from Vermont, Bernie Sanders campaigned on principles such as universal healthcare, guaranteed college tuition, and promotion of the Green New Deal. With a self-stated mission of “achieving economic, racial, social and environmental justice for all,” Sanders built a movement that fervently challenged corporate America.
These talking points didn’t translate into sufficient support from primary voters. On April 8, 2020, Sanders officially exited the race, citing the coronavirus (COVID-19) pandemic and lagging performance as primary reasons. Sanders suspended his campaign amid a 1217 to 914 delegate deficit.
Although officially withdrawn on 8 April, Sanders remained on ballots for the scheduled primaries. If Biden was unable to accept the party nomination, for any reason, Sanders may be the logical Democratic Party’s second choice. Given these circumstances, an improbable Sanders presidency would likely impact various futures market sectors dramatically:
- Equities: A swift and steep correction immediately following Election Day is the probable scenario for the U.S. equities indices. Sanders’ pledges of increased corporate and personal taxes, as well as restrictions on the energy sector, could greatly hamper U.S. economic growth prospects in the long-run.
- Safe-havens: Given the equities market tumult, assets such as gold, platinum, and Swiss francs would be in a position to gain market share.
- U.S. dollar: It’s difficult to project how the USD will be treated under Sanders. However, given the COVID-19 FED easing and slowed economic growth, long-term interest rates may stay near zero.
Elections Bring Futures Market Volatility and Opportunity
Among other things, presidential elections bring uncertainty to the markets. This year’s election will be no different, as Trump and Biden compete for the White House. To stay on the cutting edge of key futures market developments as they arise, sign up for the Daniels Trading Newsletter today.
