"Trump or Biden?": Financial Market Scenario Based on the Results of the US Presidential Election

As the US presidential election on the 3rd is imminent, the global financial markets are also keen on the results. Democratic Party candidate Joe Biden is ahead of the polls, but it is observed that the gap with President Donald Trump has recently narrowed and the election system, which secures electoral groups by state, cannot guarantee the results.

The world trade order and the beneficiaries of each industry are expected to change depending on whether President Trump will succeed in re-election or Biden's success in re-election. In particular, there are concerns that the global financial market may fluctuate significantly if the delay in counting votes and dissatisfaction with the election results become a reality.

Trump's “technology and energy stocks” and Biden’s “eco-friendly and value stocks” beneficiaries

Even if President Trump and Candidate Biden are elected, the current post-Chinese stance and protectionist stance are expected to continue. Trump's “American First” and Biden’s “buy American” policies both aim to secure jobs in the country and boost manufacturing.

The core of Biden's economic policy is tax increases and eco-friendly investment. Biden made a pledge to invest $2 trillion in eco-friendly infrastructure over the next four years and achieve 100% eco-friendly energy by 2050. This is why environmental and infrastructure-related items such as electric vehicles and solar power are regarded as beneficiaries of Biden's election. In addition, Biden plans to increase the corporate tax and income tax that Trump had lowered at the same time, so large technology stocks such as Google, Apple, and Amazon, which have led the stock market uptrend, are expected to be negatively affected.

On the other hand, there are many observations that if President Trump succeeds in re-election, the growth market, centered on large technology stocks, will continue as it is now and the energy field will also be empowered. This is because President Trump is expected to maintain the stance of lowering corporate taxes and strengthening US energy independence.

The results of the U.S. Congressional Senate and House elections along with the presidential election are also important. This is because policy coordination with the new president may differ depending on which party controls the Senate and House. For example, if the outcome of the “Biden-Republican Senate victory”, which is evaluated as the worst combination, is likely to disrupt the massive economic stimulus plan that candidate Biden was pursuing, it is highly likely to have a negative impact on the financial market.

In Korea, which is highly dependent on exports, it is also of concern that the conflict between the US and China will ease. When Biden comes to power, unilateral trade policies such as Trump-style retaliatory tariffs are expected to decrease. KOTRA predicted, “If Candidate Biden is elected, the reform of the World Trade Organization (WTO) system and the joining of the Pacific Rim Economic Partnership Agreement (CPTPP) will be promoted in earnest, so that the scope of economic activities in the US will be broadened.”

Delayed counting, more tactile for election dissent

Currently, financial markets are more keening on delays in counting and dissatisfaction with the results. In the past US presidential elections, the winner is usually decided on the night of the election or the morning of the next day. However, this year, in the aftermath of the novel coronavirus infection (Corona 19), the number of pre-voting votes such as mail voting has surged, so it may take several weeks for the result of winning or losing. In particular, there are concerns that in the core competition stocks, if the victory or loss is reversed in the future, and in the process, dissatisfaction with the counting results occurs, the entire United States may become confused.

Because of this, the market is already fluctuating. Last week, the New York Stock Exchange's leading index fell 5-6%. In the aftermath, Korea's KOSPI also plunged 2.56% on the 30th of last month. Ahn So-eun, a researcher at IBK Investment & Securities, said, "The confusion over the results of the presidential election can lead to fundamental concerns beyond political uncertainty as it causes policy voids."