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The 2020 US Elections – Part 3 – The Day AfterOctober 27, 2020
Our prediction for 2020
Over the last couple of months, we have reviewed, in two separate articles, the likely results of two presidential race scenarios.
Our first article was dedicated to Donald Trump and how he may choose to handle the economic situation should he win reelection.
Our second article focused on Trump’s opponent, Joe Biden and how he will likely tackle the tangled web left by the Trump administration were he to emerge victorious from the November 3rd election.
With this final article in the series, we want to shift the tone slightly and instead focus on the day after the election.
While previous articles have looked at the circumstances facing each candidate and their likely approaches to resolving similar issues, this article will focus on what may happen to the US economy if there happens to be a long and furious battle between the two – much like the one that took place in the year 2000.
Will the economy even feel an impact? And if so – what may happen?
Read on to see how we see things play out.
Odds the Next US President Takes Weeks To Be Confirmed
As we wrote in previous articles, the COVID-19 epidemic has thrown off more than the economy and healthcare off their kilter.
The virus has also become one of the focal points of the entire presidential race, with each candidate tackling it differently, both when addressing the current situation and when contemplating the future.
One of the main discussion points in recent months was the use of mail-in ballots, which are widely expected to be at an all-time high this year due to the pandemic, with people trying to avoid mass crowds and long lines.
It’s also a major pillar of division in the lead up to the election, but that’s another article altogether.
Current polls (late September) have Joe Biden leading over Donald Trump in both percentage points and the electoral college, but it is not an unbridgeable gap, so the possibility of a “too close to call” scenario, especially when factoring in the mass amounts of mail-in ballots, cannot be ignored or overstated.
Nerves are already frayed in the US with social tensions percolating, job losses and debts mounting and if the threat of a prolonged election battle gets thrown in the mix, well, we can easily see how doom & gloom prophecies become a reality.
An Angry Mob
In the absence of a distinct winner within a day or two of November 3rd, odds increase substantially of protests on all sides of the political aisle increasing.
But that may just be the first in a long line of protests, for the election begins a transitional period during which little to no governing is done.
This means that in the likely event of COVID-19 continuing to be an issue in multiple states, federal aid will be even less consequential than it has been so far – no more added unemployment benefits, no more rent aid or protection from evictions, federal food stamps also quickly running out and nearly all forms of government functioning on a skeleton crew level.
People in the US are already upset and quickly running out of options, so we can only imagine the scenes that will unfold when the above-mentioned dominos start tumbling one after the other.
And yet, in all the panic and uncertainty that has set in over the last few months, one thing has kept operating normally, with the exception of a small blip on the radar for a few weeks in March and April. And that is the one thing that the public at large seems to loath anyway: Financial markets.
The vast majority of adult citizens have a vivid recollection of the woes that affected them during the 2008 crisis and the years that followed; many have only started recovering over the past couple of years only to be hit hard by COVID-19 once again.
When the 2008 crisis struck, a lot of people felt dismayed by the speed in which the government sprung to the rescue of banks and financial institutions while the “man on the street” struggled or collapsed.
Twelve years later, those same people see themselves right back in the same “hole” and – low and behold – banks and markets are doing just fine.
We’re not advocating for riots, but it is not hard to fault anyone wanting to start one under those circumstances.
Insult to Injury
But let’s say, for argument’s sake, that cooler heads prevail and the US somehow makes it through the period of uncertainty, has an elected president, whoever it may be, a working government and is ready to start the long process of normalcy (viruses permitting).
Those same people that held steadfast through months of crisis and election-based economy may wake up one morning to find out that their government is now starting the long and inevitable process of cutting back benefits as they struggle to get budgets and deficits back to acceptable levels.
Even if the president-elect will come in with a ready-made plan on how to escape the crisis, it will likely have to be a massive, all-encompassing one and will require multiple discussions and corrections throughout the process, before it even gets to the voting stage and starts being executed.
With elections in early November and the inauguration in late January, there is simply no realistic way in which a plan gets off the ground before March, at best.
We can’t even begin to venture guesses into what (if any) items may be included in these supposed “plans”, but we can venture at least one guess – they will require massive amounts of cutbacks across many sections of the economy.
And once again, can you imagine who won’t be caring one iota for those cutbacks?
Banks, large corporations, financial institutions and all those that continue to profit from crisis after crisis – or at least decline at a rate that is far lower than the rest of us.
The End Result
We don’t enjoy being doom & gloom naysayers, and it is our sincere hope that, through some brilliant plan, the most powerful economy in the world can pull through these tough times.
But, alas, it appears at this point that the US election odds are of little consequence, as the country appears to be truly on a path to unavoidable financial troubles for most “common” people, while markets provide a detached and remote shining beacon of hope that fails to provide comfort to those who are sick or suffering financial hardship.
No matter how close the election turns out, and no matter who has their hands raised in victory – they, like most of the US economy, will be faced with a herculean task.
Traders can idly stand by and see which way the wind blows before acting, giving them a leg up on the rest of us.
It seems there is no time like the present to begin your financial education if you haven’t done it so far. You can sign up for our free package to begin your journey to financial freedom.