RUTH SUNDERLAND: Wall Street Begins Believing Joe Biden in Oval Office and Democrats in Power Will Boost Economy More Than Donald Trump
- President Trump warns Democrats would destroy the economy
- Trump failed to fulfill his bombastic claims in 2016 to usher in the greatest growth period ever
On a pre-Covid visit to the US last year, I was surprised and quite pleased when several Chicagoans got me in an informed conversation about Jacob Rees-Mogg, John Bercow and Black Rod.
Turns out Parliament TV was kind of all the rage in the Windy City, where viewers were captivated by the magnificence, orotund diction and sheer Ruritan spectacle of it all. For us, the US election is much more than curiosity value. The US is the world’s dominant economy and our largest trading partner. We have major interests in the recovery and who is in charge. Wall Street has a big influence on our own FTSE 100. And investing directly in the US looked very attractive this year.
Small investors in Britain who have been smart enough to put money into funds like Scottish Mortgage, which specialize in US technology stocks, have made big profits. The wisdom received says that Republicans are better for the economy and stock markets. As usual, President Trump is warning that Democrats would destroy the economy.
Awakening: There is an opinion that a ‘Blue Wave’, with Joe Biden in the Oval Office and the Democrats at the helm, would be better for markets and the economy than Donald Trump
Still, there are some very surprising voices that differ. They include the chief economist at Goldman Sachs, an institution not known for its love of higher taxes on the wealthy, which is at the top of the Democrats’ agenda.
Goldman believes a “ Blue Wave, ” with Biden handing over the keys to the Oval Office and the Democrats in control of the House and Senate, would be better for the markets and the economy than Trump. The negative impact of tax increases and regulation, Goldman argues, would be offset by a massive injection of government spending.
A review by Moody’s Analytics also suggests that a clean sweep by the Democrats would be better for growth, jobs, corporate earnings and stock markets.
Analyzes like this can be totally wrong. But President Trump has failed to fulfill his bombastic claims in 2016 of ushering in the greatest growth period ever.
In fact, in its first three years, the economy underperformed the last three years of the Obama administration. The stock markets, which Trump sometimes falsely uses as a measure of the US economy, have indeed done well. This is misleading, however, as the indexes have been skewed by the surge in technology stocks, while mainstream US industries have lagged.
As for Trump’s trade war with China, it has rocked the markets, and in any case, it has failed to close the trade gap. And his massive tax cut did not trigger an investment boom as hoped. Biden sees himself as someone who understands the common worker, as opposed to the billionaire who overlooks Wall Street. He wants to increase corporate tax rates from 21 percent to 28 percent, and individual taxes would also increase.
However, this would only affect very high earners over $ 400,000 a year and the rate would be below 40 percent, less than our own highest rate. Free traders may be disappointed that Biden, like Trump, is likely to take a tough stance on China.
In contrast, while Trump is a climate change denier, Biden is planning a $ 2 trillion investment in the green economy, which he says will create millions of jobs.
Of course, none of this matters to Trump’s supporters, and it would be unwise to write the president off. As that great American baseball player, Yogi Berra, is said to have said, “It’s hard to make predictions, especially about the future.”