The 2020 US election outlook: Part 1 – the bird’s eye view

September 16 2020

John BriggsHead of Strategy, Americas

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Brian DaingerfieldHead of G10 FX Strategy, Americas

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Read on for our key calls for the election outcomes, policy comparisons and the issues to watch in the coming weeks. 

2020 has been a year unlike any other and one of the biggest events is still yet to come - November’s US election. As ever, which way the vote goes will have huge implications not just for America, but for the rest of the world.

We’ve prepared an in-depth analysis of all the issues to watch ahead of the US election and our key calls, which we summarise in this brief article.

Keep America Great or Build Back Better?

This year, there are two main candidates seeking to win the Presidency – Republican incumbent Donald Trump, running on a campaign platform of “Keep America Great” and Democratic challenger Joe Biden, who’s pleading to “Build Back Better”.

But that’s not the only vote taking place on the 3 November election day: the US electorate will also be choosing who they want to represent them in the House of Representatives and the Senate. The make-up of the House and Senate have big implications for how effectively whoever wins the Presidency will be able to implement their agenda.

If the election were to take place today, we’d expect Joe Biden to win the Presidency, and for the Democrats to take the Senate and retain control of the House. But of course it’s still months away, and there are still lots of questions to answer – will Donald Trump’s “silent majority”, which saw him sweep into office four years ago, save the day for him once again, for instance?

Take a look here for a more detailed look at what we believe is likely to happen in the election.

Trump vs Biden betting odds (%)

Source: Predictit, Bloomberg

Voters choose their preferred candidates and parties based on all manner of criteria, but some issues will be looming larger in their minds than others as they cast their votes.

Coronavirus management could sway the swing states

This time around, of course, it’s difficult to ignore the impact of coronavirus, and Donald Trump has a negative approval rating for his handling of the crisis. With the way the Presidential election is decided – on a state-by-state basis – the pace of economic reopenings in a small number of swing states could be of prime importance, as could any surge in cases in those states. Coronavirus has been heavily politicised in the US, and any worsening of the situation is likely to be bad news for Donald Trump.

Covid-19, US Case Curve (daily change, seven-day moving average)

Source: NatWest Markets, John Hopkins University, X axis represents number of days since total cases exceeded 100

The economic response to the crisis a strong point for Trump

As ever, the state of the economy is going to be at the forefront of voters’ concerns, and this remains a relatively strong point for the current President: an August Ipsos poll found that Trump still has a positive net approval rating for his handling of the economy and jobs. Trump has been enjoying fairly consistent leads over Biden on their expected handling of the economy, with current ratings of 53%-45% in Trump’s favour.

The battleground states may make or break the results

Improvements in economic prospects at both the national and battleground-state levels will be key to Trump’s re-election. Three key battleground states – Pennsylvania, Arizona and Florida – are still experiencing double-digit unemployment, and this will probably have to improve if Trump is to overturn Biden’s current lead in these states. Worryingly for the President, the coronavirus-related slowdown has hit consumers and businesses in the battleground states hard. Some of those states are showing some signs of recovery, but most are still struggling. If the recovery improves, we would expect Trump’s performance in these states to improve as well.

Unemployment rates, seasonally adjusted

Source: Bureau of Labor Statistics, NatWest Markets

Other things to look out for

A number of other factors could also come into play in deciding the election, including:

  • Whether schools have reopened by election day
  • Voter turnout
  • The candidates’ performance in the much-anticipated TV debates.
Debate schedule

Source: Commission on Presidential Debates

Date Type
29-Sep Presidential (6 topics segmented)
7-Oct VP Debate (9 topics segmented)
15-Oct Presidential (Town Hall style)
22-Oct Presidential (6 topics segmented)

Differing tax and spending policies, but neither candidate concerned about deficits

The different approaches to tax and spending between the two candidates reflect the different priorities of their parties. Biden’s plan is to roll back some of the Trump tax cuts and levy additional taxes (that are progressive in nature) to finance a $2tn climate and infrastructure plan. Trump’s focus will mainly be on ensuring his Tax Cuts and Jobs Act is made permanent and looking to other tax cuts and infrastructure spending (of a different kind) to spur the economy. But there’s also a similarity between the candidates, in our view, in the form of a lack of concern about fiscal deficits or levels of debt relative to GDP.

In summary, if Trump wins, we expect little change on the economic policy front. If Biden wins but the Republicans hold the Senate, gridlock is likely to ensue. But if Biden wins and Democrats take the Senate – our base case, remember – it opens up a high likelihood of increased spending.


Tax Policy

Spending Policy



Trump (R)

Primary priority to make 2017 Tax Cuts and Jobs Act permanent, add new tax cuts such as capital gains, possibly payroll taxes, others.

$1-2tn extra traditional infrastructure spending (we lean to higher end), probably funded by new debt.

Increased military spending and for Homeland Security, NASA, and Veterans Affairs. Cuts to the State Department, Energy Department,  Education and a number of other areas. Potential cuts to social security and to Medicare and Medicaid

Given lack of details on any formal plan, difficult to determine exactly. We expect Trump to cut taxes and spend, so not a lot more debt and deficits than Biden, but also more fiscal stimulus.

Biden (D)

New progressive tax structure; 28% corporate tax rate from 21%, higher upper income individual taxes, higher capital gains taxes, fewer exemptions and deductions for small business and upper income earners.

$2tn climate spending plan dominated by infrastructure spending on clean energy, transportation infrastructure, clean water, high-speed internet, education. Separately, supports more aid for states, healthcare workers, hospitals and workers.

Seeks healthcare expansion/reform, worker protections, higher unemployment benefits, greater veteran support, higher spending on housing and education. Unlikely that all campaign proposals will be enacted, but upside risks to deficits/spending.

NatWest estimates climate plan represents ~2.4% of GDP in year one, less in subsequent years (assume Senate control and passage as indicated). The deficit impact would be smaller assuming tax increases of around $140bn in year one, but any additional spending would raise that figure (risks all to the upside).


Geopolitics: unilateralism vs. multilateralism

President Trump’s America First mantra has been a hallmark of his geopolitical strategy. The President has shown a strong preference for unilateralism and a rejection of multilateralism, making no secret of his disdain for multilateral agreements, including NAFTA, the Trans Pacific Partnership and the Iran nuclear deal.

Biden offers a different path – a move towards, but probably not a complete return to, Obama-era multilateralism. However, when it comes to US-China relations, we don’t expect Biden’s stance on China to differ too much from Trump’s hard-line approach.

Take a look here for more on the potential geopolitical consequences of the US elections.

A Democratic sweep

In the most likely scenario, in which the Democrats sweep into power by winning the Presidency, the House of Representatives and the Senate, we think the Biden legislative agenda and expectations of large amounts of issuance would lead to a steeper curve. Ultimately, we are not convinced that a Biden administration would be bad for risk assets in the longer run, but acknowledge that there could be a negative reaction initially. We think a Democratic sweep would see the US dollar weaken.

Split Congress scenarios

The second-most likely scenario, in our view, is Trump winning the Presidency but the Democrats win the House, resulting in at least two more years of gridlock. This scenario would probably be positive for risk assets and lead to a modest rise in the dollar. A Biden Presidency with a Republican House would also see gridlock, but in this case bonds may rise and risk assets fall.

A Republican sweep

While we do not view a Republican sweep as a likely outcome, 2020 has been full of surprises. Were it to occur, risk assets should rally initially, although we would be cautious if Trump sees this as a mandate to push his America First agenda even more aggressively. We would also expect the US dollar to rise as growth-positive policies would be priced in alongside a renewal (and potential acceleration) of Trump’s America First policies.

US Election Watch

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