In the early hours of this morning President Donald Trump and Vice President Joe Biden carried out comfortably the most ridiculous presidential debate in history.
In a mean-spirit 90 minutes exchange Trump deployed the tactic of constantly interrupting and repeatedly lying to an extent which left even the moderator visibly exacerbated at times. Biden for his part hardly impressed – the sheer enormity of the task of batting away the untruths presented by Trump meant that he was unable to articulate any clear policy shifts he would implement.
Following the debate a snap poll found that 48% of viewers felt Biden had won and 41% Trump. Those numbers sit almost exactly where the broader polls sit. Biden stands around 7% ahead of Trump with a lead of between 4-8% in the individual states he must win.
With that in mind we can probably conclude that the debate has not shifted the race. Yet that means it has made Biden more likely to win. These set-pieces debates (and there will be two more) are the key moments where Trump could turn around Biden’s lead. His failure to shift the debate in this debate will make it significantly harder to turn things around by 3rd November.
The most noticeable events were Trump’s refusal to condemn white supremacism and some jarring personal attacks on Biden’s family.
The most successful forecasters of US elections for the last 15 years is a team at FiveThirtyEight led by Nate Silver. Silver currently gives Biden a 78% chance of victory. He is of course keen to point out that this still gives Trump a 22% chance of victory and such odds come in all the time. This is why people go to the horses.
However, it must be viewed that the Biden is a clear favourite.
We believe that the market risk of a Biden win is overstated. It is true that he is proposing tax rises that could lead to a fall in the S&P 500 of around 400 points when reflected in earnings. However, this is already well understood by the market. In fact the clear market priority is probably getting a clean outcome one way or another.
We continue to believe that neither outcome will cause major long-term market problems. However, a contested election could add to volatility at the start of November.
We must remember that the same few weeks will see the US election result, the outcome of UK-EU trade talks and possibly confirmation on the effectiveness of Phase III vaccine trials.
These events have the capacity to bring both good and bad news. However, what they are almost certain to bring is some volatility.
We believe portfolios are well prepared to weather this period and that the wise investment strategy is to stay diversified and try to ignore very short-term market movements which are likely to quickly reverse as events unfold. Sometimes the best approach is to watch these market machinations with curiosity but never with panic and trust the long-term strategy in place.