Asset Management

Investors’ Outlook: Air Force One has a new captain

Dan Scott

Dan Scott

Chief Investment Officer, Head of Impact & Thematics

After a lifetime of personal setbacks and a patient ascent to the top, Joe Biden’s time has finally come. Nicknamed “Amtrak Joe” for his decade-long railway commute between his home in Wilmington, Delaware, to Washington DC, he will now switch to the more glamorous presidential plane Air Force One.

Biden win paves the way for stimulus measures

However, the wave of popular support that pushed open the doors of the White House for Joe Biden stopped in front of Capitol Hill. Hopes that his Democratic Party would retake the majority in the US Senate, using it alongside its grip on the House of Representatives to form a formidable legislative force, were dashed – the two chambers of US Congress will remain split along “red” and “blue” party lines.

Still, with Mr. Biden now at the helm, the Democrats increase their clout, which will probably enable them to pass modest policy changes. Donald Trump is now gone but his tax cuts will probably remain in place. We can now also expect economic stimulus measures, aimed at supporting those affected by the Covid-19 pandemic. Improved US relations with the rest of the world – with fewer sanctions and lower trade tariffs – is another likely and welcomed consequence of Mr. Biden moving into the Oval Office early next year. Financial markets may have qualms about the Democrats’ regulatory bias, but should appreciate friendlier trade relations. And please keep in mind that the support we currently receive from central banks is what matters most for the markets, there is no change there.

Covid-19 refuses to go away

Meanwhile, a second wave of the pandemic is sweeping across the globe. In Germany, a new nationwide lockdown has been imposed with bars, restaurants and entertainment venues being closed. French restrictions are even stricter given the closure of non-essential shops and a stay-at-home order. The danger of a new wave of full-blown lockdowns all over Europe is increasing with each passing day. Night-time curfews in Italy and Spain are also in place and stricter measures envisaged – if needed. Most governments try to prevent such a drastic measure at all costs, but the lighter measures imposed now might not be enough to tame the raging pandemic.

The economic outlook is, therefore, far more uncertain now than in March, and we forecast the global economy to contract 4.2% this year. The International Monetary Fund has already warned that a long, uneven and uncertain recovery lies ahead. Most countries won’t be able to bounce back to pre-pandemic levels already next year, with the notable exception of China. Recent figures indicate that Chinese growth already exceeds pre-Covid levels, boosted by both industrial production and its consumers opening their wallets. The picture is not as rosy in Europe. Not only is the EU grappling with the negative economic impact of Covid-19. The trade bloc is simultaneously embroiled in never-ending Brexit talks. The outcome of the negotiations is still unclear less than two months before the current transition phase ends on December 31, 2020.

May the (Air) Force be with him

To end on a positive note: In the US, Joe Biden’s victory is a breath of fresh air for the US economy, set to be buoyed by fiscal stimulus getting the country back on track and fostering a transition from a fossil fuel economy to a renewable one. We congratulate Joe Biden on this historic moment and hope he can bring his nation closer together again. May the (Air) Force be with him.