Markets &US elections:Donald or Hillary,does it matter?

There is a lot of commonality between the two...

A key issue facing investors is whether a win by Trump or Clinton would makemuch difference to investment performance. It is particularly important giventhat in modern times, non-mainstream candidates (such as McGovern or Perot)have never won or indeed never even ran close to winning. Hence investors areunprepared not only for what a Trump presidency might mean but also theextent to which a strong showing by non-mainstream politicians (such asSanders) would impact critical congressional and state elections.

The danger clearly includes a potential for much greater politicization ofgovernment institutions. As it is, since the 1980s US institutions have alreadybeen thoroughly politicized, and further erosion of bureaucratic independencecould cause significant damage to LT growth and lead to sub-optimumdecisions. The US institutional framework had survived multiple prior assaultson its integrity (such as FDR’s US Supreme ‘court-packing’ schemes in 1930s)and investors should have confidence that it will also survive this test. However,it could be a ‘bumpy ride’ as the electorate itself is polarizing and cares less forintegrity and far more for salvation from immediate issues of dislocating labourmarkets, income/wealth inequalities and slow growth rates.

Essentially, most young people seem to be gravitating to the left whilst some ofthe older people are shifting to the right. It is understandable, as young peoplehave nothing to lose and left wing politicians tend to be inclusive and promise a‘near perfect society’ whilst older people have something to lose and tend to beconservative and ask for protection. Whilst US politics have many other faultlines, this shift towards extremes is the key. Given that both camps ask forbroadly the same salvation, it explains why policy prescriptions of the left andright wings are similar. Whilst differing drastically on social issues (such ashealthcare), their core economic remedies are similar. Both want to rebuildinfrastructure and the power grid, and are likely to forgive student debt. Bothalso offer greater protection from globalization.