If it’s up to the stock markets, the United States will have a new president in a few weeks.
MAJORSTUEN (Nettavisen Økonomi): Nordea Markets had on Thursday invited to a small press seminar about the stock markets.
One of the topics was the United States and the forthcoming presidential election, where the outcome may also have an impact on the stock markets. And if we are to believe Nordea, there is no doubt about who we should cheer on.
– The myth that Donald Trump is the share-friendly candidate and Joe Biden the share-hostile one is a truth with modifications, said analyst Joachim Bernhardsen in Nordea at the press seminar.
When asked by Nettavisen why Joe Biden is the best for the stock markets, Bernhardsen answers as follows:
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Getting the economy started
– Biden is helping to get the economy back on track in the US. There are some negative conditions as well, Biden can increase taxes a bit, but we do not think he can do as much as he has said he will do.
– There are reassuring trends in the market as Biden tightens its grip on the market. There is an 85 percent probability that he will take the victory in the presidential election, Bernhardsen said at the seminar.
He also pointed out that Biden has far better relations with China, better mood in the market.
According to Bernhardsen, there is extra great uncertainty this year related to the presidential election and that Trump will not relinquish power. This is one of the reasons why the markets are cheering on Biden.
Clarification
The uncertainty about the outcome is the worst for the markets.
– When you get a result, it does not matter if it is Biden or Trump who is the winner, but you get a clarification. But the market will probably take out much of the potential promise we can get in advance if Biden maintains the lead in the polls.
Biden has said he will reverse half of the tax cuts that Trump has come up with.
– If he does, it is undoubtedly negative for the market, says Bernhardsen.
In the polls, Biden currently has a fairly clear lead over Trump. But what if the incumbent president were to win the election against all odds?
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Low probability
– It is considered a fairly low probability. The reason why things have been better lately is Biden’s lead. The probability of an uncertain outcome has decreased, Bernhardsen answers.
– For Norway, does it matter much who wins the election?
– No, I do not think so. If you look at interest rates and currency, I do not think it has everything the world has to say. What may have an effect is that we believe Biden will bring more stimuli to the economy. If interest rates rise faster internationally, it will make it easier for Norges Bank to raise interest rates as well, the Nordea analyst answers.
Nordea is generally optimistic about the stock market going forward. Chief strategist Erik Bruce said at the seminar that it looks like we are getting the cursed V-shaped rise in the market: A sharp fall is replaced by a sharp rise.
– 2020 looks bad, but in 2021 we can be back to where we were in 2019, said Bruce and referred to the analysts’ expectations.
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Underestimates
Equity analysts are often accused of overestimating earnings. That is not entirely true, when the economy is emerging from crises, they tend to underestimate, especially the cost cuts companies make during crises, Bruce said.
But there is still a fear of another big lockdown in several countries, and that it may be as poor earnings as it was in the second quarter.
– We do not think so, the situation is very different. There are few deaths compared to the number who test positive, and as it looks now, we have better control, and I do not think we need a full lockdown, said Bruce.
The chief strategist said that it is the coronavirus that prevents a boom in the economy, not tight financial markets or people’s belief in the future.
Different
And the corona crisis is different compared to previous crises, because this time it is especially the service industries that are affected and not the production of goods.
– This is good, because the day the virus breaks out, there is good reason to believe that consumption and investment will return. There are many indications that when the coronavirus loses power, the economy will return, said an optimistic Bruce.
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