US Election Countdown: A Dreaded Fourth Scenario
SAXO
2024-09-29Six weeks to go to the US election. This week, we look at a fourth scenario for the US election we previously considered unlikely but remains quite possible and what it could mean for investor portfolios.
This week: as Trump edges lower in polls, a fourth election scenario and what it could mean
This week has felt quieter if more absurd than recent hectic weeks in the US election season. Cat-eating memes related to Trump’s unsubstantiated claims that Haitian immigrants are stealing and eating cats in an Ohio town took up the most bandwidth in social media. The two candidates are promising almost everything to everyone: Harris vowed to support investment in crypto and AI, while Trump was out promising additional tax cuts and even mentioning the idea of limiting the top interest rate on credit cards to 10%. Americans pay a stunning 25% on average for credit card balances!
A dreaded fourth scenario?
This week, we look at a fourth scenario for the US election that could prove the most broadly negative for the global economy and for the stock market in the wake of the election. And we look at European companies that could do well under any scenario in which Trump becomes president.
Chart of the week: one sector that may thrive in the event of a Trump presidency
As we discuss below, German infrastructure investments are needed and a Trump presidency could accelerate them. Above, a five-year cumulative return chart of three German companies with significant infrastructure exposure: Siemens, Hochtief and Heidelberg Materials.
As we discuss below, German infrastructure investments are needed and a Trump presidency could accelerate them. Above, a five-year cumulative return chart of three German companies with significant infrastructure exposure: Siemens, Hochtief and Heidelberg Materials. We know that a Trump presidency would bring tariffs, and not just for China. That will hit the current “sick man” of Europe: Germany. Its economic model of excessive reliance on exports is already failing even before the risk of Trump II, in part on the disruptions to export markets and energy prices from the war in Ukraine, but also as China is gobbling up the global car export market, especially in electric vehicles. Germany must get its head out of the sand and re-invent itself. That will require massive investment on the domestic front, especially in its aged infrastructure. From digitalization of government at all levels to the basics like the power grid and roads and bridges, Germany is falling behind. Federal elections must be held there by September of next year, and the current very unpopular sitting coalition will need to come up with a new investment plan to get the economy moving forward or it will face a wipeout. It will likely do so with or without Trump, but investments might be accelerated and larger should he win as his tariffs will deepen Germany’s plight.
