Eric Stein

In the US presidential election, the polls have tightened over the past several weeks and market-implied betting probabilities have started to close.

Eric Stein, Co-Director of Global Income at Eaton Vance Management notes: “At this point, however, I think Joe Biden should still be considered the frontrunner. Recent momentum for President Trump depends heavily on what happens with the economy and the coronavirus. Only a month ago, large majorities of potential US voters expressed fear about how much the pandemic seemed to be accelerating, which lowered the probability of Trump’s re-election. Now, with the number of new infections slowing somewhat in the US, Trump’s prospect of winning — implied by either the polls or the market — appears to be going up.”

He adds: “Much has been said about the economic impacts of President Trump getting re-elected, Biden winning but the Republicans keeping the Senate, or Biden winning with a clean Democratic sweep of Congress. Certainly, there would be a big impact on tax rates and regulatory policy depending on these outcomes.

“I think it’s also important geopolitically whether Trump or Biden wins. Clearly, the Trump administration has shifted the narrative on China — essentially the only bipartisan issue in Washington where everyone has been trying to out hawk each other.

“If Biden gets elected, I don’t expect him to go soft on China as Trump has claimed, but rather to be far more hawkish than he was as Vice President in the Obama administration.

“That being said, I anticipate that Biden’s approach would be different — far more multilateral with US allies in Asia, and with Europe more in the fold than it has been under President Trump.

“So I think the geopolitical ramifications of the US election should not underestimated and could even be more important than the impacts from a domestic tax and regulatory policy perspective,” Stein says.

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