ElectionWatch: ‘After the convention’ - DNC edition
Aug 27, 2024
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Tom McLoughlin, Co-lead of ElectionWatch and CIO Americas, and Nadia Lovell, Senior US Equity Strategist, delve into the political landscape post-DNC. They discuss the implications of Vice President Harris's nomination, evolving election probabilities, and the significance of polling on voter sentiment. The conversation also highlights economic policy shifts, including proposed tax changes and their potential market impacts. Additionally, they analyze RFK Jr.'s unexpected endorsement of Trump and its ramifications on electoral dynamics.
The DNC convention showcased Democratic unity fueled by opposition to Trump and strong support from key voter demographics including young and suburban women.
Election forecasts indicate a competitive landscape with Kamala Harris having a 40% chance of winning, influenced by significant policy contrasts with Trump regarding taxation and tariffs.
Deep dives
Democratic National Convention Insights
The convention highlighted a sense of unity among Democrats, largely attributed to opposition against former President Trump and the relief surrounding President Biden stepping down from the race. Vice President Kamala Harris has successfully managed to bring together various constituencies, including voters under 30, African-Americans, and college-educated suburban women, which are critical for a Democratic victory. An interesting observation is that early polling from the second congressional district of Nebraska indicates that the Harris-Walz ticket may outperform Trump. This suggests that while Trump's base remains solid, he will need to engage more directly with voters to maintain support.
Election Probabilities and Congressional Control
Recent forecasts now show a 40% probability of Kamala Harris winning the election with a divided Congress, while her chances of a 'blue sweep' stand at 15%. Conversely, Donald Trump's odds are at 35% with a unified GOP Congress, indicating a tight competitive landscape. The dynamics suggest that Republicans are likely to gain control of the Senate, particularly with key states like West Virginia leaning Republican. The Montana Senate race, affected by local issues such as reproductive rights, is set to be closely contested, further complicating the electoral map.
Impact of Policy Proposals on the Economy
The discussion includes significant policy proposals from both Harris and Trump, such as raising corporate taxes to 28% under a Harris administration, contrasting with Trump's inclination to increase tariffs on foreign goods. If Harris wins with a unified Congress, the most likely outcome would see personal tax cuts being extended for lower earners, which would shape the economic landscape significantly. However, the potential corporate tax rate increase might face challenges from members within both political parties. Historically, Congress has gradually ceded trade authority to the executive branch, allowing for unilateral tariff implementations, which could create economic ripples depending on the election outcome.
Election Uncertainty and Market Reactions
Volatility is expected to rise as the election approaches, though recent shifts in the race dynamics have not yet significantly affected the markets. While corporate profits remain critical for investor focus, attention should also be paid to the economic implications of taxation and tariffs proposed by both candidates. The potential for tariffs under Trump may slow economic growth and impact sectors like consumer discretionary, while a split Congress under Harris might lead to a more stable environment with continued support for green energy initiatives. Overall, election volatility warrants careful portfolio management but does not necessitate drastic changes to long-term investment strategies.
We weigh in on the state of the race and investment implications following the Democratic National Convention (DNC). Featured are Tom McLoughlin, Co-lead of ElectionWatch, CIO Americas, and Nadia Lovell, Senior US Equity Strategist, CIO Americas. Host: Anthony Pastore
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