Before Covid-19, Wall Street was convinced President Trump had an easy path toward re-election. Now many presidential polls show former-VP Joe Biden with a comfortable lead in both national surveys and in critical battleground states. The Trump campaign is quick to remind voters that there is still a lot of time until November 3rd and that at this point last time, Trump was able to make up a low-single-digit deficit to Hillary Clinton. Currently down double digits in both the Quinnipiac and NBC/Wall Street Journal polls, it is obvious President Trump is trying a new strategy going forward. Trump has reversed his stance on masks and got a new campaign manager. Trump was forced to make changes as his weakness was most noticeable with his core demographics, especially with strong declines with white voters with no college education.
Biden, once a longshot for the Democratic nomination now has a chance of also winning back the Senate. While Biden’s campaign certainly lacks enthusiasm behind it, at this point in the fight against the coronavirus many Americans seem they would prefer if he were handling it.
Heading into November, much of the focus will be on the coronavirus, systemic racism, permanent damage to the labor market, and health care, but there are still many questions. Controversies over mail-in ballots to who will the 78-year old Biden select as his running mate will remain key topics in the short-term.
With strong expectations the coronavirus will re-emerge in the Fall, we could see a second wave when voters need to head for the polls. Limited voting sites in large metropolitan cities could give an edge to the President, but it might not matter as mail-in voting might becomes the norm. Research by PNAS show that universal vote-by-mail has no impact on partisan turnout or vote share.
Given Biden’s age, it could mean that if victorious he may only serve one term. Some are concerned with Biden’s history with aneurysms and treatment for an irregular heartbeat and high cholesterol, which makes his VP pick even more important. Biden seems determined to have an African American female as his running mate, but he could change his mind if wants to be strategic in choosing someone well know in one of the key battleground states.
Too many variables remain to make a prediction on who will win in November. Trump will require a de-escalation in tensions with Beijing, at least two successful vaccine phase 3 trial results, and for the unemployment rate to be closer to 8%. For Biden to be successful he needs to select a safe VP pick, limit the amount of gaffes, and perform well in the debates.
Oil
The Presidential election has a lot at stake for the energy industry with climate change now becoming a top priority for many Americans. Biden’s clean energy plan was well received by climate scientists and has not derailed his momentum in the polls. Biden wants the US to achieve a 100% clean electricity standard by 2035. The oil and gas industry are fearful that if elected, Biden’s energy plan to transition away from gas-fired power to renewables will kill what remaining jobs have survived the coronavirus pandemic.
Oil prices could initially trade lower alongside most risky assets with a Biden victory, but ultimately rise higher as US oil and gas production will likely tumble. A Trump re-election should be very positive for the energy sector as drilling will not be going away anytime soon. Crude prices would also benefit from expectations that the economy will remain strong and that corporate taxes will remain low. The US however will likely be a net exporter of crude and oversupply risks will prevent any oil price rally from over-extending.
Gold
The immediate aftermath of the election will be volatile for gold and also depend on how many seats in the House and Senate change. A blue wave being the best outcome for gold, while a red wave would be rather crippling.
If President Trump is re-elected, a couple years later the Fed could begin to lose their independence. Right now, Judy Shelton, a Trump nominee could become a member of the Fed if the Republican held Senate confirms her. The risk at losing independence would only happen if Trump picks Shelton to become Fed Chair once Powell’s term ends in 2022.