Source: Jin10 Data
As the first round of debates between Biden and Trump approaches, investors not only hope to understand their policy positions but also closely monitor their behavior and conduct.
At 9 am Beijing time on Friday, US presidential candidates Biden and Trump will hold their first televised debate. Investors watching the debate hope that both candidates will present thoughtful positions on fiscal policy, tariffs and taxation, while also closely monitoring their mental acuity.
The debate will take place in the CNN Atlanta studio without a live audience. Many on Wall Street hope that both elderly presidential candidates will prove that their minds are sharp enough to serve four years in the White House.
Grace Fan, Managing Director of TS Lombard, pointed out that Democratic nominee Biden and Republican nominee Trump are the oldest presidential candidates in major parties in history. She wrote that if either candidate looks incompetent, it could "break the otherwise evenly matched competition."
"The scariest situation for investors is if both candidates are deemed unfit," says Robert Phipps, board member of investment firm Per Stirling.
Phipps is concerned that 81-year-old Biden may appear "listless" or that 78-year-old Trump will babble too much nonsense.
Although markets often pay little attention to politics, Phipps says that the biggest concern is change because change brings uncertainty.
Jack Ablin, Chief Investment Officer of Cresset Capital, hopes to see a "rational debate".
"I don't want to see a dramatic outcome. In many ways, the debate reflects the election process of this country... If the debate descends into chaos, someone walks off stage, and the election cannot proceed, it will send a terrifying message to the American people and the world," Ablin says.
Wall Street is especially eager to hear how Biden and Trump plan to address a range of issues, including skyrocketing budget deficits, soaring interest rates, stubbornly high inflation, signs of economic slowdown, and foreign trade relations.
Paul Christopher, head of global investment strategy at Wells Fargo & Co's research arm, says investors are most sensitive to cautious plans to deal with these issues.
"Overall, the market hopes that each candidate can be rational rather than extreme. If the debate turns into personal feuds, it will send a bad signal. Being able to manage part of the country involves showing a willingness to compromise," Christopher says.
Both Biden and Trump tend to take a tough stance on trade by imposing or threatening tariffs, but investors are cautious about the impact of tariffs on inflation.
"If either candidate can curb enthusiasm for tariffs and trade restrictions, we expect the market to respond positively," Christopher said.
Regarding fiscal policy, Ablin points out that interest payments on US borrowing are catching up with defense spending. In the 12 months ending in May, defense spending was $866 billion, while interest payments were $836 billion.
"I hope one of the candidates can show some leadership in fiscal responsibility and realize that our current path of fiscal spending is unsustainable," he said.
Carl Ludwigson, Managing Director of Bel Air Investment Advisors, said the first debate, which is more than five months from the election, is unlikely to have an impact on financial markets. He believes that at most, the candidate who dominates the debate can begin to change the odds of the Republican or Democratic victory.
"No one plans to knock out their opponent in the first two rounds of a fight. They just want to feel each other's strength," said JJ Kinahan, CEO of brokerage firm IG North America.
Editor/Lambor