For the Republicans in the USA, things have not exactly gone according to plan in the past few days: The corona infection of the US president dominated the news, but what was really remarkable was the failure of a new economic and stimulus package. Donald Trump will lose his last trump card before the elections. However, this gives investors a taste of what will happen after November.
Because in Germany it used to be said that “the Reds can’t handle money”. The Reds, this is the SPD and in the USA this was long said of the Democrats. Donald Trump in particular, as a Republican, drove up debts and cemented zero interest rates for a long time. Zero interest rates, which mean for investors in this country that you have to invest your money. Every euro in the savings bank is dead capital.
In Europe, Donald Trump’s first triumph was a mystery to many. And now they cannot understand that the President still has a chance of re-election after numerous scandals and the mismanagement of the Corona crisis. Even if various factors such as polarization within the population are increasing sharply, the old phrase “it’s the economy stupid”, coined by an election advisor to Bill Clinton in the 1990s, remains. In this area, Trump delivered up to the Corona crisis. Incidentally, as well as partially in the field of foreign policy, because unlike his predecessor George W. Bush, Trump can be said to have many things, but not necessarily warmongering.
From a stock market perspective, the profits of the large corporations rose significantly, which was largely due to Trump’s massive tax cuts, which he initiated after the 2016 election. But the general population also benefited. The labor market boomed until the Corona crisis, the disposable household income rose significantly across the country and many Americans are benefiting from the stock market, which is again at a record level after Corona and, in contrast to the European market, has shown far higher profits in recent years, according to calculations by the broker Etoro.
Now Trump threatens to lose ground in the last few meters in this profession. According to Fed Chairman Jerome Powell, the US economy urgently needs new government support. Many Americans are dependent on new stimulus checks that Trump had distributed in response to Corona. But an agreement with the Democrats seems impossible before the election. After that, however, the stimulus will come, debt will rise and interest rates will stay at zero.
The financial markets are turning on Joe Biden
In the financial markets, the shock about the deal that had failed for the moment was short-lived. Trump’s chances of re-election have fallen significantly in the past few days. According to calculations by the US portal Five Thirty Eight, Trump currently only wins the vote in 17 out of 100 simulated cases.
The US stock exchanges primarily fear the chaos of a tight election result, which is why the Pro-Biden forecasts are currently being welcomed. The scenario of a “blue wave” is played on the market. In addition to the presidency, Biden could also conquer the Senate and defend the House of Representatives. Even if the Democrats were to partially reverse the tax reform, this scenario would be excellent for the stock exchanges. Because the Democrats could rule through and would be no less generous in their spending policy than the Trump administration.
It would then almost make no difference who rules under the Fed. For investors, however, it means: You have to take the accumulation of wealth into your own hands and accept eternal zero interest as a fact.
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