Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Investment Institute
Macroeconomic Research

US presidential election preview: You’re fired?

  • 28 July 2020 (5 min read)

Key points

  • Presidential and Congressional Elections are less than 100 days away. However, if the elections were held tomorrow, polls suggest Democrat nominee Joe Biden would win and the Democrats could take both the House and the Senate.
  • President Trump may recover from low ratings over the remaining months if the virus abates and the economy recovers. This would still be an uphill struggle to save the Presidency but could see Republicans retain a Senate majority.
  • Biden proposes the most progressive programme in nearly half a century. The degree of control over Congress will determine the extent to which his proposals can pass.
  • Biden’s spending plans should deliver more of a short-term boost to the economy, although we expect meaningful fiscal support whatever the makeup of the next government. Biden’s program looks likely to be more positive for US long-term growth prospects as well.
  • Market reaction to a Biden election looks likely to be cautious and could add to short-term economic headwinds

Less than 100 days, but plenty could happen

The 22nd Amendment was passed in 1947 limiting the office of the President to two terms. This followed the death of Franklin D. Roosevelt during his fourth term. Since then the US has had 12 Presidents. Eight of those have been elected to continue in office (Lyndon Baines Johnson was not elected for his first term, becoming President after the Kennedy assassination). Three Presidents did not secure a second term, including Gerald Ford, Jimmy Carter and George H. Bush. Donald Trump will aim to avoid joining this small group of former US Presidents as he seeks a second term in office.

The following note considers the likelihood of this as President Trump competes with Democrat nominee and former Vice President Joe Biden. We describe the broader race for Congress, considering the separate dynamics for the battle for control of the House of Representatives and the Senate. We look at the policy alternatives that different electoral scenarios could deliver. And we describe the likely economic and market implications of different outcomes.

The Next President

With less than 100 days before election day, Joe Biden has a significant lead in both national polls and crucial battleground states. Over the last month, Biden has maintained an average lead of 9 points over Trump. Two polls in July estimated this lead at 15 points, one of which was the ABC News/Washington Post poll – one of the most accurate pollsters near election day in 2016.

It is not just the size of Biden’s lead that is impressive: Biden has recently topped the 50% mark in several polls, reducing the number of ‘undecideds’ that Trump could win. According to polling website 538, Biden is only the third candidate to break 50 points at this stage in the race. The other two were both incumbents: Richard Nixon in 1972 and Ronald Reagan in 1984, who both went on to win by a large popular vote margin of 23 and 18 points respectively. Although a similar result in November would be highly unlikely, current polls suggest the President has a lot of ground to recover.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.

    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.