With the televised presidential election debates starting this week, it may be useful to draw comparisons with other election campaigns. While not strictly comparable, there are certain parallels with the 1968 and 2016 elections, according to Bill Dinning, chief investment officer at Waverton.
From a market standpoint, it is unlikely that a change in office would have any immediate impact, and having a more predictable, diplomatic president could ultimately be a better outcome for Wall Street.
However, the long-lasting effects of the amount of monetary experimentation and fiscal stimulus need to be addressed by whoever wins in November.
Popular vote forecast
Source: The Economist
“There is a strong case that Trump can win this thing,” said Dinning. “Every election since the 2000s has been pretty close and it's still very much a 50/50 country.
“With the electoral college working the way it does, it’s going to be a nail-biter.”
In recent weeks, commentators have found parallels with the 1968 US presidential election, highlighting the high level of social unrest and Donald Trump portraying himself as the ‘law and order’ candidate.
“There is definitely a parallel with 1968. However, Nixon was able to run as a ‘law and order’ candidate because he had a lot of credibility on that,” he explained.
Nixon had been in the national consciousness for over 20 years prior to the 1968 election and was fiercely anti-communist, famously standing up to Nikita Khrushchev in the famed ‘The Kitchen Debate’.
“This is completely different to Trump who is replaying his 2016 insurgent outsider campaign even though he’s been the incumbent for three-and-a-half years,” said Dinning.
Dinning explained that aren’t enough similarities to draw clear comparisons.
He explained: “In 1968 the country was at war; American soldiers were being killed in Vietnam, there were riots on the streets and assassinations of leading figures which had a huge impact on the election.
“Yes, there are parallels, but this is not 1968.”
While Trump is running the same campaign, it seems as if Joe Biden is also running a similar campaign to Hilary Clinton in 2016.
“Biden’s biggest problem is he’s also having to re-run the 2016 campaign because like Clinton, he keeps going on about how awful Trump is rather than saying anything positive about his aims for the country,” he said.
“The other problem is that he’s been around for an incredibly long time – as Trump keeps reminding people – and the platform on which he’s running was written by the progressive wing of the party and he doesn’t believe in it.”
Geopolitical tensions between the US and China could reach a point of no return if Trump wins a second term, whereas Biden offers the more diplomatic choice, many believe.
“Biden won’t change the approach to China,” the Waverton investment chief added. “He might change the tone, but the underlying standing up to China and trying to bring jobs home is straight out of the Democrat playbook; they’ve been wanting that for 20 years.
“One of the curious things is that the Democrats should have learnt from 2016, but by force of circumstance are having to run a similar campaign.”
Out of all the potential scenarios that could happen in November, the Democrats will want to avoid the Republicans holding the Senate and will hope for a clean sweep across the board.
The freedoms that Trump has afforded to the corporate sector will unlikely continue under a Biden presidency, however, having sought greater regulation of tech companies.
“The issue for the corporate sector in regard to regulation is more old fashioned than that,” he said.
Dinning (pictured) also noted that former Democrat presidential hopeful Elizabeth Warren has also made a good case for treasury secretary in a Biden administration. 
“She ran a campaign that talked a lot about buy-backs,” he said. “The biggest net buyer of US equities in recent years has been the corporate sector primarily through buybacks.
“An interesting policy could be to tax buy-backs, and companies who buy back their stocks will have to pay a tax equivalent to the dividend income tax shareholders pay.
“My guess would be that companies who do the buybacks would pay the tax because they need to do the buybacks to mop up the share count issuance that goes through the roof whenever they pay their managers too much.”
While a Democrat clean sweep would give them greater freedom to impose their own mandate and reinstate some of the policies of the Obama era, if the Republicans hold onto the Senate it would hamstring those fiscal and monetary plans.
“The stock market would like that,” he said. “It likes gridlock in Washington, but really there’s no great differential in the general approach of being pro-capitalism from a Democratic to a Republican one.
“It would be a fairly benign scenario for the market.”
However, markets would favour the more moderate, predictable approach Biden offers.
“In terms of Wall Street’s ability to do business, having a more conventional politician in the White House is a good thing,” said Dinning.
“The more conventional diplomacy will carry on and will likely re-join the Paris Agreement and other multilateral things that Trump wanted nothing to do with.
“There would be a sense of the US coming back into the fold.”
Investors in the US have enjoyed substantial levels of return this year despite the pandemic, and this will likely continue whatever the result.
However, the chief investment officer argued that either president would have to deal with the implications of this crisis in the near future.
“At some point the market could change its tune on that, particularly if it’s a Democrat-controlled Congress, and we could see the bond market vigilantes suddenly make a re-appearance,” noted Dinning.
Indeed, the market could soon react negatively to the amount of stimulus being put into the system.
“It could start to have a negative effect on the long duration reception that the cash flows of these leading technology companies are attractive even with current valuations,” he said.
“If people start worrying about the inflationary impact, it could be a bit of a game-changer.”