We have taken our first look at the 2020 U.S. election, focusing on the battle for the White House. We will update our views on the election and the financial market implications over the course of the next 15 months, as the Democrats choose their nominee and the probable policy platforms take shape.
– There are potential capital market disrupters among the Democratic candidates, but the best bet is that the party will move to the center to try to recapture the White House.
– The ability of even the most left-leaning Democratic candidate will be circumscribed unless the Democrats can win both houses of Congress as well as the White House. The odds of such a sweep are low.
– Watch the ISM manufacturing index as a short-hand guide to the election. A falling or sub-50 reading in mid-2020 would boost the Democrats in key industrial swing states, while a rebound from the current low level would benefit Trump’s re-election.
– Note that over the past 150 years, median equity returns have been higher under Democratic than Republican presidents.