The current presidential election anticipates three scenarios that can cast varied impacts on the market conditions.
As per the estimation done by the Saxo Bank, the US economy will witness a K-type recovery irrespective of whoever wins the November 03rd Presidential elections. Already started pondering upon what is a K-shaped recovery? Well, in simpler terminology, K-shaped recovery is the one wherein the code of conduct for varied parts of the economy wanders like the arms of the letter K. Americans who are highly-incomed will be there to witness the employment to bounce back and progression for the income, while the Middle as well as lower-income class individuals will not.
As per the words stated by Chief Investment Officer (CIO), Saxo Bank, Steen Jakobsen that “there has been a huge surge within the technology, fiscal stimulus as well as the Federal Reserve Balance sheet, debt issuance, social riots, the overall top 1 percent being provided richer, autocracy as well as inequality. He also stated further that during a webinar series organized within the Alternative Investment Management Summit during Thursday “there has been lesser employment, lesser productivity as well as lesser innovation due to the monopoly of the technology firms, lesser basic research as well as declining of US educational system, lesser globalization, as well as decline in privacy.”
The global largest economy is in pursuit of inching nearer towards its elections, the Saxo Bank-Banking giant anticipates three core scenarios to develop over a period of time.
- First is that President Donald Trump will not concede defeat as there is a grim 40 percent chance during the contested elections. According to the Bank’s overview, it will in turn lead to an upsurge in volatility, due to uncertainty spike in sale-off in equities, a feebler US Dollar, and as well as emergence of gold as powerful unit.
- Second chance of 40 percent that Joe Biden making a cleaner sweep leading in powering sales-off in equities, particularly related with technology, rally within greener stocks as well as surged up interest rates.
- The last and final theory disclose by Saxo Bank anticipates a meagre 20 percent prospect of Trump’s triumph that in turn will also trigger volatility like the first scenario, cause further four years of trouble within the global order, trigger a relief rally that will further end up in form of two split houses, curbing the potentiality for a better Fiscal thrust.
Mr. Jakobsen stated further that “they will never wish to come back to pre-Covid levels of the GDP as well as demand as the present Pandemic circumstances have made businesses models, they operate at the moment unworkable from future perspective. He however, was also prompt in stating that there is a zero corelation existing between US elections as well as ROEI (Return on Equity Investments).”
Mr. Jakobsen has promptly invited “the investors for swiftly taking their firm foot regarding higher weightage within Chinese market within 2021. As an investor, they are bound to receive huge returns in the expanding debts within Chinese markets.”
The Saxo Bank official also stated out the variances between plethora of policymakers’ responses within 2008-2009 and within this year 2020, that policy response in the 2009 was hugely powered with aid of quantitative easing as well as enlargement of the Fed Balance Sheet however, minus any fiscal aid.
He also added further that “During 2020, they have an enormous amount of Fiscal Spending with the QE numbers within the two core months March and April alone have exceeded beyond QE1, QE2 as well as QE3. The Fiscal spending matches and drives directly alongside the consumers, while Fed Balance Sheet expansion has absolute no value for the authentic economy.”
Mr. Jakobsen praised the US Central Bank’s latest strategy and was prompt in referring Fed’s inflation target of 2 percent as an “outdated” and that this latest central bank’s strategy will aid in average inflation rate to surpass the 2 percent ceiling, that has continued to be in system since 40 long years.
Mr. Jakobsen also anticipates that within next decade or 20 years, 60 to 70 percent of the global initial public offerings to be bolstered by platforms like the Tencent, Alibaba, JD.com as well as other such Chinese aided firms.
In the meanwhile, Head of FXs strategy, John Hardy stated that “in general global financial community wishes a speedy recovery of the feebler US Dollar as most of the global debts are designated within this currency. He also prompted the need of the hour for the feebler greenback in inflating the legacy debt, both the foreign as well as native. He also added that an overrated currency (Dollar) aids to a huge liquidity hurdle.”
Praising China’s catastrophe response, he referred to that there is much less emphasis given regarding people’s incomes and that they are more revolved in promotion of their economic activity, trade production levels as well as in storing upon skillful reserves.
“The US stimulus is solely a money splash. There is no productiveness or no extend within real gross domestic manufacture growth. The rush is to grant because of convivial stability. It’s no longer the auspicious blend because of forex fundamentals,” Mr. Hardy elaborated.
