Capital Group has a handy person to call on when it comes to looking at US politics from an Australian perspective – a former Australian ambassador to the US and Capital’s vice chairman, Michael Thawley. He thinks investors shouldn’t be too worried by a Biden victory.
In a webinar held while the result was still uncertain, last week (November 5), as it still is, depending on legal actions, Thawley analysed the repercussions of a change in the presidency, about which markets have generally been nervous, primarily because of proposed changes in the tax system and increased costs in medical and public sector funding.
Thawley saw firsthand a disputed count before. When he was Australia’s Ambassador in Washington Democrat candidate and another former vice president, Al Gore, first conceded defeat and then withdrew his position when it appeared he was back in the lead, only to be disputed by George W. Bush who eventually won Florida and the presidency four weeks later after a Supreme Court ruling.
In this race, Thawley made several key observations which were independent of the eventual victor. The nation would remain divided socially. These observations included:
- Almost all the polls failed to pick up Mr Trump’s electoral strength. Partly this is due to a perception of his energy and drive. His opponent was seen as weak
- A lot of Trump’s voters did not approve of him personally
- There was a very important systemic issue of the failure to appreciate the frustration of many voters and a preoccupation with the ‘elite’
- Feeling marginalised, the loss of jobs, a loss of national identity and what America stood for impacted a wide range of people who did not approve of America’s culture
- From Capital’s own research on popular views: a majority disagreed with the suggestion that the US reflected their values; a majority thought Trump could better run the economy; 65 per cent did not think Biden’s tax proposals (hitting wealthier individuals to the benefit of less wealthy) would not affect them; and,
- A majority thought the media was biased.
Thawley said: “Sometimes there’s a bit of hysterical talk about a crisis in democracy. There are extremely difficult issues without an easy solution. But I don’t think there’s a crisis in the American system.”
Nor did he think that a Biden presidency would be particularly bad for the markets or economy. “Maybe there will be more of a shift to the left than there was a few years ago, but that’s a trend happening in all the major western countries. There will be a new focus on these problems and Biden will move fast but he has the problem of getting the support of a Republican senate.”
In a prescient comment last Thursday, Thawley said: “If Trump loses, I don’t expect him to ride off into the sunset. Both parties have to re-think their philosophy. With the Democrats there is quite a difference of opinion between leftists and moderates. In the Republicans, too, some want a return to the types of presidency under Reagan or the compassionate conservatism of George W. Bush.
He said Biden would keep the current tariffs in place but probably hold out an offer to China and put the relationship on a more mutually beneficial footing. “The US has always been hard-nosed on trade issues, whether you’re an ally or not,” Thawley said.