Summary: The 2020 US election puts the Democrats in control of the presidency and both houses of Congress. Big healthcare and pharma stocks collapse 50%.
The polls going into 2020 don’t look promising for Trump, nor does the electorate: 2018 mid-term elections and limited 2019 elections in the US showed that voters living in suburbs across the US are turning in droves against the Republican party of Donald J. Trump. Plus, the marginal Trump voter in 2016 and in 2020 is old and white, a demographic that is fading in relative terms as the largest generation in the US now is the maturing millennial generation of 20-40-year-olds, a far more liberal and less white demographic.
Talking to investors around the world, we’re staggered by the consensus that Trump is a shoo-in for a second term. They and the markets are in for quite a shock: voter turnout in the 2018 midterms point to heavy turnout in 2020 as well, as the younger generation is in a rebellious mood. Millennials and even the oldest of “generation Z” in the US have become intensely motivated by the injustices and inequality driven by central bank asset market pumping and fears of climate change, where President Trump is the ultimate lightning rod for rebellion as a climate change denier.
We believe that elections are lost far more than they are won. In 2016, the uninspiring, unpopular avatar of the Democratic elite establishment, Hillary Clinton, failed to motivate many on the left to even show up at the polls and lost the election to a fired-up mass of Trump voters who wanted to overturn the system. This time around, the vote on the left is thoroughly rocked by dislike of Trump – with suburban women and millennials showing up to express their revulsion for Trump. The Democrats win the popular vote by over 20 million, grow their control of the House, and even narrowly take the Senate. Healthcare is the single sector that is in for a strong headwind from a Democratic clean sweep in the election, as Medicare for all and negotiations for drug pricing bring a massive haircut to the industry’s profitability.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.