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Wealth Management: Strategy blog – 2020 US Election: Biden time?

Strategy team: Charlie Hines

Amidst a backdrop of civil unrest, economic disruption and the risk of a second wave of coronavirus cases, the race to the US presidential election in November draws closer.

Press reports suggest that campaigning is not one of Biden's strong suits, and yet since the launch of his campaign back in April 2019, he has up to this point maintained a significant and consistent lead in the polls - despite a slight dip in February of this year - even before he was formally the democratic candidate. His current lead is 8 points ahead of Trump - in a recent CNN poll the gap is as much as 14% - a jump from +5 Biden held in mid-May. At this point in the 2016 campaign Clinton was ahead by about half the amount Biden is now, and in fact trailed Trump in some news polls. In the past two months, Biden hasn't trailed in a single national poll, according to FiveThirtyEight data, and his campaign to date is, statistically speaking, 1.5 times less volatile in the polls in comparison to Clinton in 2016.

Some additional encouragement for the more moderate centre-ground supporters: Clinton never polled close to 50% - her average live poll in June 2016 was 45% - whilst Biden has averaged 49%, and more importantly has reached 50% in 3 different live interview polls in the last week - a milestone Clinton never reached. That said, these are polls of the popular vote, and not weighted by electoral college; despite Clinton's lead in the opinion polls, she failed to secure the 270 votes in the electoral college that would guarantee her the presidency.

The implication of Biden's proposed legislative changes are not to be underestimated. Biden aims to raise $4trn dollars in new taxes over 10 years, evenly divided between corporate and individual taxes, equating to roughly 1.5% of GDP per annum.  Increases in corporate taxation - more or less reversing the Trump cuts - would have a material impact on the earnings, and competitiveness of US companies. For Biden to avoid a repeat of the Mondale v Reagan election, such big changes to tax plans need to be marketed carefully. For Biden, the corporate tax programme, though aggressive, is really a funding mechanism for a broader climate change and infrastructure initiative, designed to move the US from a reliance on cars and internal combustion to renewable energy; it's not necessarily a green new deal, but something Biden can market well. There will thus be some corporate winners as well as losers - but the overall impact still seems likely to be negative to US Inc. As yet, plans are of course in outline shape only: a lot could yet change before November. A stronger economy would likely boost Trump.

So far, we've seen Biden gain ground in key swing states, something Clinton failed to do. According to the polls, it seems the political map is starting to change. That said, history has told us that polls can be fallible - there is no such thing as a safe bet. The recent shift in sentiment has seen Trump slip in both election polls and personal approval ratings, but that still doesn't necessarily translate to a decisive victory for Biden. Once lockdowns are lifted and on-the-ground campaigning resumes, we could see things shift once again.

Disclaimer

Past performance is not a guide to future performance and nothing in this blog constitutes advice. Although the information and data herein are obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, no responsibility or liability is or will be accepted by Rothschild & Co Wealth Management UK Limited as to or in relation to the fairness, accuracy or completeness of this document or the information forming the basis of this document or for any reliance placed on this document by any person whatsoever. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, targets, estimates or forecasts contained in this document. Furthermore, all opinions and data used in this document are subject to change without prior notice.

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