The American presidential race is about to start, and the only question the opinion rolls are raising is whether Democrats will win the Senate in addition to the presidency and retain or expand their control of Congress.
President Donald Trump is behind in the presidential race in every poll by at least five points, while all major news outlets, with the exception of Fox News, remind us about how poorly he is managing the COVID-19 outbreak, as well as the profound economic crisis in which the United States, strongest economy in the world, is immersed in.
Last Thursday, in the midst of the best month ever in terms of job creation, Bloomberg Television (owned by Michael Bloomberg, a former Democratic presidential candidate), was trying to spread doubt about the accuracy of such numbers while emphasizing data on total unemployment, without giving credit to a possible V-shaped recovery, which many economic indicators are already predicting.
And it’s on this V-shaped recovery and the subsequent market reaction where Trump is staking his possible victory. The economy is important, but markets are even more so. This is the ace in the hole Trump needs as a president who has moved the markets at will over Twitter the last few years.
Trump is the greatest trader president in history. On weaker days, he always found reasons to bash the Federal Reserve or let slip the possibility of reaching a trade agreement with China. Or he promised new expansive programs. When markets become overheated, he has known exactly how to level valuations with some of his most bewildering tweets.
Trump needs the markets, and more importantly, the markets need Trump. The Nasdaq composite is at a historical high, and the Standard & Poor’s 500 index almost has a positive balance for the year. The average American’s available income is the highest in decades and 401(k) pensions are in a very healthy position. All of this, while the number of accounts of small investors on Robinhood, an online investing platform, is reaching stratospheric levels. Trump knows this.
For now, only the small investor has participated in this stock recovery. What will happen when the institutional investor is forced to participate? Trump knows this.
The average American might respond to a poll saying he won’t vote for Trump out of shame, but a parallel poll made in the middle of a pandemic demonstrated that Americans are more concerned with the economic situation than their health. Trump knows this.
Nevertheless, don’t be surprised if you see an infrastructure program worth of billions of dollars, a fiscal expansion program of similar magnitude, subsidies to companies by the end of the year, or, on top of everything, the greatest financial bubble in history, which no doubt will have all kinds of consequences, some of them inflationary. But all of this could unravel after the election. Trump knows this.
In the meantime, the recommendation is not to bet against the American president, to invest part of your savings in variable forms of income and to keep buying gold, because whatever happens, you will be protected even if election predictions fail.
“It’s the economy, stupid,” former President Bill Clinton famously said in his 1992 campaign to dethrone former President George H. W. Bush against all odds. The former Republican president had attained a 90% of approval rating. The Republican Party doesn’t forget. Today Joe Biden is the one with higher approval rating, but it’s the economy … and Trump knows this!