Biden vs. Trump: How the election could reshape the economy

On Thursday, a presidential debate will take place between the incumbent President, Joe Biden, and his contender, Donald Trump. Experts from Saxo Bank presented analyses regarding the potential impact of the November election results on various sectors of the American economy.

On Thursday, for the first time before the November elections, the two candidates for President of the USA, Joe Biden, and Donald Trump, will face off in a debate. Experts from Saxo Bank presented their comments on the possible effects of the elections in the USA.

Peter Garnry, Head of Equity Strategy at Saxo Bank, points out which specific industries may benefit depending on the outcome of the presidential elections in the USA.

In the case of a Trump victory, Garnry notes that "during his last presidency (2016-2020) Trump focused on supply-side economics, which was reflected in substantial corporate tax cuts. His policy benefited corporations and the capital market, although not necessarily the average American."

However, the Saxo Bank expert emphasizes that "Trump can no longer pursue a similar policy, including tax cuts, because U.S. public debt is growing faster than nominal GDP. Trump's 2016-2020 strategy cannot be continued without seriously risking the loss of confidence in the dollar and the long-term financial stability of the U.S. economy."

Nevertheless, according to Garnry, certain stock market sectors could react positively to a Trump victory. He mentions the European defence sector, the U.S. real estate market, and small-cap companies.

Trump has long criticised Europe's minimal involvement in NATO and threatens to withdraw the USA from the alliance or at least stop protecting countries that do not allocate at least 2% of GDP for defence purposes. Although it is unlikely that Trump would actually withdraw the USA from NATO, his assurances raised alarms in European capitals, and many EU countries decided to drastically increase their defence budgets - assesses the Saxo Bank analyst.

Regarding the American real estate market, Garnry notes that "The past few years have not been successful in the U.S. real estate market. However, this is a sector in which Trump is personally involved and has many influential friends. Therefore, it is likely that he will pursue a policy supporting this sector. It also fits his political message of the need to improve the lives of ordinary Americans."

The Head of Equity Strategy at Saxo Bank also highlights small-cap companies. "The optimism survey of small businesses by the National Federation of Independent Business (NFIB) showed that in 2016 and 2020, the sympathies of the owners of such enterprises leaned towards the Republican Party and Trump. Similar to real estate, supporting small businesses fits into Trump's narrative of 'America First' policy, so we can expect that the stocks of American small-cap companies will rise again during his presidency" - he writes in the analysis.

Peter Garnry also analysed the sectors that may benefit from a Biden re-election. He refers to the president's words from his State of the Union address in early March. "Biden, in his State of the Union address in early March, stated that his re-election would provide the USA with a president who looks to the future, not one who wants to turn the country back in time. This means that Biden most likely wants to be seen as the one who promotes new energy sources, increases international cooperation, and supports modern solutions for a modern America," - analyzes the Saxo Bank expert.

According to Garnry, three industries can benefit if Biden wins: clean energy, infrastructure, finance, and semiconductors.

The Democratic Party has long been recognised as the most progressive party in terms of ecological transformation in the USA. Therefore, it is likely that companies involved in this field will enjoy stronger support under Biden's administration - he assesses.

"It is widely known that the infrastructure in the USA, such as highways, airports, and bridges, is in poor condition. Improving infrastructure is, and is likely to remain, one of Biden's priorities, translating into support for companies in this sector. Another issue gaining importance and Biden may address that is access to clean water" - adds the Head of Equity Strategy at Saxo Bank.

Finally, the expert refers to the finance and semiconductor sectors. "If Biden is re-elected, it will be his last four years in office, which may mean that this is the right time for him to enact significant changes in the country. To do this, he will need to create an environment where the financial sector can support his major initiatives, such as the INVEST, as mentioned earlier in the America Act and the US CHIPS Act (legislation providing subsidies for companies in the semiconductor sector). They aim to strengthen domestic production, design, and research fields in the USA, especially in semiconductors. The success of these projects largely depends on whether banks and other financial institutions can provide the necessary funding," - concludes Peter Garnry.

The debate begins on Thursday at 9:00 PM EST, which means that, considering the British time zone, it will start at 2:00 AM GMT on Friday, 28th June.