Just in case you didn’t know, it’s about to go down… in D’banj’s voice.
US Election Commentary…
Welcome to the maiden edition of our election series as we walk you through elections in developed and emerging market countries under our coverage. What better way to start than to begin with “the US Presidential Election”? Before we begin, we would like to wish you a happy new month. November is popularly known as the month of Thanksgiving. Despite how insane the year has been, there is something to be thankful for; For us, we are grateful to you, our clients, as you continue to journey with us into the future.
One thing President Trump will surely not be thankful for is how 2020 has unfolded so far. Given how impressive the US economy performed in 2019, the election was meant to be a walk in the park for Donald Trump, but now, not as much. From the global pandemic that has killed over 231,000 Americans to the Covid-19 induced economic disruption, coupled with the nationwide Black Lives Matter protest. I guess this is what they mean by “Sucker Punch.”
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Looking at the polls, Biden has been in the lead for the past few months. Biden leads by 5-10 points on average across national polling averages, 73-23 for Biden in NPR/Marist, 52-31 for Biden on YouGov, 68-27 for Biden on Fox News, etc. Nevertheless, we cannot always trust the polls because if we did, Hilary would have been the president.
What you should know
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Trump has stood by his “America first” rhetoric for most of his campaign, from the renegotiation of trade agreements to lowering taxes, coupled with the support of a dovish FED. On the matter of an additional US stimulus, Trump has proposed $1.9 trillion, $500 billion less than what the Democrats are proposing. We expect him to maintain his dovish stance on economic policies albeit with increasing concerns of a big deficit that could lead to a debt crisis. One thing we have learned from Biden’s campaign is that he is a fan of Green energy. We expect more government spending to skew towards infrastructure and renewable energy which will intensify the shift from fossil fuel to renewable energy. Biden has also expressed his plans to renegotiate America’s trade agreements in hopes to rebuild trade relations battered by Trump. Not to forget, Biden remains hawkish on tax.
The Blue wave (i.e. Democrats win the White House and The Senate while retaining control of the House)
The Red wave (i.e. Republican control of the presidency and The Senate and Congress)
Divided Government (i.e. Either party controlling the presidency but not The Senate and Congress)
A blue wave scenario is expected to be favourable for dollar underlying assets including, SSA Eurobonds on the back of an anticipated less confrontational approach on external policy, an easing in trade wars, and a speedy passage of the stimulus bill.
A red wave scenario is expected to send a mixed signal to the market. These stimulus plans may boost markets
and investors may breathe a sigh of relief in favour of Trump’s dovish policies compared to Biden’s proposed
hawkish tax policy.
A divided government may result in a more muted impact. While it would put checks and balances on either
candidate, limiting the worst excesses, it would also mean a fiscal gridlock that would not be good for markets.
On the local front, the Nigerian Stock Exchange All Share Index (NSEASI) surged by 6.39% WoW to close at
30,530.69 points, reaching 16 months high. The NSEASI YTD returns settled at +13.74% YTD (vs.+6.91% YTD in the prior week). The market breadth that tracks investors’ sentiment was relatively strong, closed at 10.33x (vs. 1.52x as the market recorded sixty-two (62) advancers as against six (6) decliners in the week.
NSEASI is now 3rd on the World Equity Index Ranking.
The better-than-anticipated earnings results from listed companies coupled with low yields at the fixed income
space continue to sustain the bullish momentum in the equities market. Nevertheless, we expect to see some
profit-taking activity this week on the back of the strong rally seen last week, creating possible entry points for
investors looking to invest in the equities market