14 Oct 2020
I can foresee it affecting markets after a president is chosen, but what about now?
Ngooi Zhi Cheng
14 Oct 2020
Student Ambassador 2020/21 at Seedly
TLDR: US has a major effect on the world's economy and as a result, the president holds immense power over the world's economy as well.
Historically, the US presidential election comes into focus as a market driver within the last half of the election years. The uncertainty associated with the US presidential election in November may be a clear source of potential market volatility over the subsequent few months because the election draws nearer.
A November win by Democratic presidential contender Joe Biden with a Republican Senate and Democratic House would likely be the simplest scenario for markets over the future, as we might see a more measured approach from the White House towards the US-China relationship while President Trump’s tax cuts are unlikely to be rolled back with a Republican Senate.
Following this, the next-best outcome for markets would be a Trump win.
Finally, we see a Democratic sweep of the White House and Congress to be the result most detrimental to markets given the likelihood of upper corporate and capital gains taxes.
Under a Democratic presidency, the rapidly growing sectors around renewable and zero-carbon energy production and operation would see a new dawn soon. A Democratic President would emphasize large-scale emissions reduction, which might foster de-carbonization through massive investment in clean energy infrastructure and deployment of low-carbon or maybe zero-carbon fuels within the US economy.
In the utility sector especially, we see an increased bifurcation between those firms that are more exposed to renewables compared to those still living within the past.
A Democratic President would likely strengthen the National Environmental Policy Act to clarify the scope of climate and emissions reduction disclosure, and certain also provide greater support for renewables infrastructure like offshore wind fields.
Any company that owns coal, nuclear or gas generation outside of a cost-of-service rate framework is in danger of losing market share and earnings. Should there be a carbon tax, companies with power fleets that are predominantly coal-and gas-fired would see their plants in danger of becoming uneconomic.
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