The US economy and stockmarket should continue to perform no matter who stands in, or wins, the presidential election, while the next UK government will only have limited room for manoeuvre, said panellists at a recent event in London.
Despite highly polarised and often chaotic recent political events in the US and UK, investors should remain positive, whatever the outcome.
This was the message from two high-profile panellists during a dramatic late afternoon briefing in London for wealth and asset managers, focusing on US and UK elections, providing a barometer of investible trends and associated risks.
“We are now in a full force hurricane politically in the US,” Charles Myers, chairman of US consultancy firm Signum Global Advisors, told an audience at the City’s historic Stationers’ Hall, answering questions from economist Sharmila Whelan, who moderated the briefing. Signum works with financial institutions to analyse potential impact of political events and policies on their business models.
“We have an unprecedented situation of a US president, who has won his primary, about to be pushed out by his own party,” said Mr Myers, commenting on rising demands from Democratic party governors for President Joe Biden to quit the 2024 presidential race and step aside for a younger candidate.
Turning tide
“This has never happened in all American history, it’s a very big deal,” said Mr Myers, who advised Hillary Clinton during her ultimately unsuccessful 2016 campaign and Mr Biden during his victorious 2020 White House bid. “Things are moving incredibly quickly,” he told the gathering, convened by Quorum 15, a global debating forum for investment firms. “The tide has turned against President Biden.”
Mr Myers had a one-to-one meeting with Mr Biden the day after his disastrous TV debate with rival candidate Donald Trump and reported that “he is fine” with “age appropriate cognitive issues” and “struggling a bit physically, but fine”.
But the damage was done during the broadcast, during which Mr Biden later admitted he struggled to stay awake. As a political adviser, Mr Myers understands Democratic campaign strategists have three weeks to turn things around, getting the president out into swing states and in front of “friendly” journalists on TV. That said, his party’s leadership is starting to waver, with the only path to review Mr Biden’s candidacy leading to a vote at the Democratic National Convention, to be held in Chicago from August 19 to 22.
Despite talk of a number of other contenders, it is Mr Myers’ belief that vice-president Kamala Harris is the only viable option. Many commentators, he said, have underestimated her appeal to women, black voters and young people, and ability to act as a “catalyst” to get the vote out amongst these key groups. “She will really give Trump a run for his money,” he said. “Kamala is much more popular than people realise.”
Record market highs
According to Mr Myers, the US economy and stockmarket would continue to prosper under Ms Harris. “This is a very high functioning, technocratic US administration,” facilitating a healthy economy and “stockmarket at record highs. There will be no change,” he said. “Regardless of who wins, I have been telling clients, the outlook for the US remains positive.”
This sunny market prediction is based on expected continuation of four key factors: the $1.6tn fiscal stimulus kick-started by the Inflation Reduction Act; inward FDI flows of 10 to 15 per cent above the historical average; a technology boom where “every major AI company is based in the US”, and a “weak China”, which leaves the US looking much more attractive for economic growth and FDI.
While a second Trump presidency might spark an improving US relationship with the UK, potentially resurrecting a trade deal, Mr Myers said Europe – and Ukraine in particular – would be the major loser. He expects Mr Trump to renew a trade war with Brussels, cut off funding for Ukraine and lift sanctions against Russia. Under Mr Trump, a deal with Vladimir Putin would be struck within three-to-four months, but would take much longer under Mr Biden, he said. Either way, Russia would end up officially acquiring 20 per cent of Ukrainian territory, before the start of a major EU-led reconstruction of a territorially sovereign Ukraine.
The view from London from Kay Swinburne, a former Brussels lawmaker intimately involved in financial services regulation, was equally intriguing. She saw very little difference between the potential centre ground policies of the UK Conservative and Labour parties, with both enjoying very narrow “wiggle room” to engineer sustained recovery for a troubled economy hit by twin pressures of Covid and Russia’s invasion of Ukraine.
Continued engagement with the City and private equity industry in particular is vital to these prospects, she said. “I wouldn’t underestimate the role private equity has in our ecosystem,” she said, with an imperative not to do anything to upset its key players. She commended the selection of Rachel Reeves, as a “pro-business, pro-City” likely chancellor, to lead economic revival.
Like Mr Myers, she said a Trump presidency would be better for the UK than a Biden-led US government, which had “de-prioritised” the UK relationship “for the first time in living memory”.
While there has been much speculation in the UK about how Labour leader Keir Starmer might try to redraft the Brexit agreement as UK prime minister, Baroness Swinburne stressed that entering new negotiations with London was not a priority for EU countries, more concerned about internal issues such as the rise of far-right political forces. The UK is no longer the major trading partner for EU nations, and that is unlikely to change, she said.
“Anyone who thinks this is where our future growth will come from has not spent time in EU institutions,” she said. Nevertheless, once-fraught regulatory dialogue between Brussels and London around issues including financial services had matured and “normalised” she said, which boded well for UK business.
