A so-called “blue wave” win in the November election – where the Democrats gain a majority in the Senate – could result in a progressive policy push that sees a massive boost to renewables, healthcare, education, and housing. But whatever the outcome, stimulus will flow freely.
“There will be a tremendous level of fiscal and monetary stimulus, combined with the prospect of a new stimulus bill and the idea of a Fed ‘put’ for the foreseeable future,” said Jason Epstein, senior portfolio manager at First Sentier.
“The real question is how sustainable that approach is. Will it continue to underpin markets, or is there a breaking point? There are also questions about how it will impact the US Dollar, and if the US Dollar will retain its place as the leading reserve currency.”
China relations will remain under pressure, with both candidates taking a hard-line stance to bring manufacturing home in an effort to rebuild American industry, while infrastructure spending will likely remain the domain of the states.
“The White House has less direct ability to influence outcomes in the infrastructure sector,” said John Ma, head of investments, North America, unlisted infrastructure.
“While funding can be allocated to the states at a national level, it’s the states and cities who mostly choose how to deploy the funding. As such, the election is unlikely to have a big impact on specific infrastructure projects.
“In the wake of the 2008 recession, Federal stimulus funds were focused on ‘shovel-ready’ projects that would create jobs immediately. It was a missed opportunity for bigger, more ambitious projects. Hopefully we don’t see the same phenomenon play out this time,” Mr Ma said.
