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America first? Not with stocks

D.he old stock market adage “political stock exchanges have short legs” is always gladly taken by market experts when they try to put price losses on the stock exchanges due to political events into perspective. The argument is that politics only influences stock exchange prices for a short time, whereas “hard facts” such as quarterly results and economic data have a more lasting effect.

Now the first (chaotic) television debate between the American President Donald Trump and his challenger Joe Biden cannot necessarily be classified as a geopolitical trouble spot – but a bit. The first of three planned debates ahead of the presidential election on November 3rd could certainly cause concern for investors. It suggests America has very eventful weeks ahead of it. It does not seem realistic that the stock exchanges will be relaxed during this period. The fact that Trump was infected with the corona virus should not help calm the nerves, even if at least the German leading index Dax only reacted with minimal price losses on Friday morning.

It is positive for investors that both Trump and Biden want to change little or nothing about the current expansionary financial policy course. The reason is easy to find: It’s about keeping the consequences of the corona pandemic in check. In addition, there will likely be significant investments in American infrastructure after the election. Both presidential candidates have similar plans here. Donald Trump wants to invest $ 1.5 trillion in classic infrastructure, while Joe Biden wants to invest $ 2 trillion in renewable energy and other future technologies, among other things. Western Asset Management believes that raw materials and construction companies will definitely benefit. The traditional energy sector could suffer if Biden wins the election, whereas providers of renewable energy should benefit, the asset management team said.

It will also be more exciting for investors to see how foreign policy will continue after the election – especially with regard to America’s relations with China and Europe. A future President Biden will probably rely more on international cooperation than Trump. According to the experts at Western Asset Management, it remains to be seen whether this will bring substantial improvements in relations with China.

World economy still unstable

Christopher Smart, market expert at the Barings Investment Institute, is also cautious about US-China relations: “China’s rapid recovery from the pandemic looks tempting, but relations with the United States are likely to deteriorate, regardless of who is Presidential election wins. Candidates Donald Trump and Joe Biden, who almost disagree, are both calling for tougher measures against a country they believe behaved badly during its global rise. ”Market watcher Smart puts his statement into perspective a bit. A short window for progress in trade relations could open in the next year as political interests temporarily align.

With the global economy still on the ropes, Trump, Biden and Xi would have an incentive to ease trade uncertainty and create an opportunity for a new deal in which China cuts its subsidies and America eases tariffs for the country granted. “Basically, relations between the two countries are still heading towards tougher times, as there is consensus on both sides that the other country is irreconcilably hostile.”

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