The first debate between President Donald Trump and former Vice President Joe Biden will take place on Sept. 29 — the first of three debates scheduled to take place before Election Day on Nov. 3. The first debate in an election season leaves an indelible impression on voters, especially in regard to the challenger. And often, this impression has nothing to do with substance on the issues and everything to do with optics and presentation. In short, Biden needs to show voters that he is strong enough and competent enough to hold the office. How he presents side-by-side with Trump will be determinative, in our view.
For the economy and markets, however, substance does matter. Below are some of the issues that we hope to see addressed in these events.
Critical issues to watch
COVID-19. Top of mind is the U.S.’ fight against COVID-19. In a recent town hall, Trump suggested he might pursue a “herd immunity” strategy if there is another resurgence of the virus.1 In contrast, Biden has suggested that if recommended by medical experts, he would be open to implementing another widescale lockdown similar to the one experienced last spring. We will be listening for the candidates to confirm their preferred responses to the virus, as well as any further details about each candidate’s plans to combat any future resurgence in the virus. Countries such as South Korea have been very effective in tamping down the virus through the implementation of a strong contact tracing infrastructure, and by rapidly implementing targeted lockdowns when cases rise. It will be interesting to see if Biden proposes something similar. Will responses be targeted or broad? Will responses be driven by the federal government, or by the states? Will the federal government create a robust contact tracing infrastructure? These approaches have the potential to significantly impact economic activity. In addition, as vaccine trials progress, it’s important to hear how a potential vaccine would be distributed to the population.
China. We will be very focused on both candidates’ plans regarding how they would engage with China. The Trump administration’s approach has created significant volatility in markets, and there is fear that a second term would mean even more erratic and aggressive moves against China. We want to hear what the president has to say about his plans — would he continue to pursue a unilateral and disruptive approach if re-elected? On the other hand, there is greater uncertainty about what a Biden administration might mean for the U.S.-China relationship. In our view, there are two main possibilities: One is that a Biden presidency would hit the “reset” button on relations with China, while another is that Biden would continue to be aggressive with China, but in a more measured and multilateral way. Neither of these approaches would be disruptive to markets, in our view, and even thought the latter may cause some concerns, a multilateral approach might be more effective (and be a step toward globalization) than pursuing a unilateral approach, as Trump has done.
Taxes. Perhaps the biggest fear for markets vis-à-vis a Biden presidency is the potential for taxes to increase. We want to hear which taxes in the Biden tax plan he is committed to implementing, and whether or not the state of the economy will impact his timing: He plans to raise taxes, but when? If he decides to raise taxes immediately, will it be corporate or household or both? If household taxes are increased, would it only be for the wealthiest Americans? Clearly the economic recovery is still very fragile, so raising taxes next year could be problematic, in our view.
Infrastructure. This is one area that both candidates have said they would spend more on, but we haven’t gotten much in the way of details. It would be good to hear what each candidate’s infrastructure spending plan is, including the amount they plan to spend on infrastructure, how it will be financed and perhaps even when it might be implemented. In the 1930s, government spending on infrastructure was used as a way to fight unemployment and put people back to work, and it was successful in reducing unemployment and helping the economy. Might the same be true going forward?
Other topics to watch
In addition to the topics above, we believe the following issues may have a potential impact on markets and investor portfolios:
- Technology. Technology is an area of confusion for investors. Both candidates seem interested in regulating technology — but in different areas. Will that be a priority for either one? This may be important for tech investors to know.
- Health care. Similarly, there is confusion around what each candidate plans in terms of health care. Both of them appear to be interested in lowering pharmaceutical prices. But the key questions that we have are: 1) What is Trump’s plan for a substitute for the Affordable Care Act (ACA)? 2) Will Biden seek to rebuild and strengthen the ACA, or will he pursue a Medicare For All strategy? The answers to these questions may have significant implications for health care.
- Climate change. This debate is taking place as wildfires rage in California and Oregon, and the Gulf Coast seeks to recover from the impact of Hurricane Laura and Hurricane Sally. Notably, the National Hurricane Center has run out of approved names for storms this season, meaning that future storms will be named after letters in the Greek alphabet — the first time this has happened since 2005. This puts climate change in the spotlight. How will the candidates address this issue, particularly in regard to the 2015 Paris Climate Agreement (which Trump withdrew from, and Biden has pledged to rejoin)? This of course has serious economic implications for the short and longer term.
We recognize that every four years, each candidate rolls out a platform with a wide variety of proposed initiatives. This can create shorter-term volatility in specific sectors that would be impacted by these plans. However, it is important to note that usually only a few signature policies typically come to fruition and become law. So, while we hope to hear details on all of the issues above, it will be just as critical to hear how each candidate plans to prioritize their platform. We want to hear what their top legislative priorities are, as the top one or two are the only ones likely to become law.