FT subscribers can click here to receive Swamp Notes by email.
In a word, no. While many investors place big bets on the election outcome, these can prove to be wrong. While it is possible that you see short-term swings, the longer-term market math is likely to be driven by things that neither of the presidents can materially change – Covid, the US financial health, and demographics, all of which are currently pointing to slower economy, growth and more debt . Even if you have a different Trump administration, I think we are at the limit of what tax cuts could do to create a 2017 market sugar high.
One of my favorite analysts, Luke Gromen, posted it last week in his “Forest for the Trees” newsletter: “Whoever wins, the markets can react to the established narratives for a few days, but then either Trump or Biden and Congress begins The Get of their safety advisories, which, according to math, will likely look something like this: The US economy is unlikely to grow without further federal stimulus aid, and the US government bond market cannot function without the help of the Fed. So, if you don't want to agree to either of these, you'll need to start with the choices you nominally want to default – USTs or US Baby Boomers permissions. "
Of course, none of the candidates will allow any of these outcomes, so in any scenario after November 3rd, we'll likely see more federal fiscal stimulus monetized by the Fed and the US banking system. Why is this? Because since your own FT has been writing for some time, foreign creditors are no longer willing or able to write US debt. My colleague Gillian Tett last looked at the subject and asked who would buy the new American debt. Answer: the Fed. Nobody else really wants it.
Now there is an argument that there may be more demand for government bonds than people think because retired baby boomers have turned into those assets as part of more conservative portfolios. However, an aging population and an underemployed group of millennials also point to slower growth.
Ultimately, we're going to need something powerful to strengthen the economy in a way that creates more jobs. We need to create a new wave of productive federal spending that will fuel the next great investment and productivity boom on Main Street – as I wrote earlier, this is exactly what fueled the last two great real economy growth booms – first the government did the development of the commercial Railways and then the Internet.
As I've also written, I think the seeds for this could be in Joe Biden's green stimulus plans. But it will take an incredible team to do it. On that note, without counting chickens, Ed, who would you like to see in a Biden government?
Democratic pollster Stan Greenberg makes an alarming case that the Republican Party could become more radical if Trump loses.
I was moved by the New York Times special section, "Out of Work in America," which covered the personal stories of real people struggling with unemployment amid the pandemic. It's a great way to remind yourself that these are not just numbers, but real people with felt experiences that need to be absorbed and understood.
The Times has also rightly pointed out that America cannot find the parents of 545 children separated at the border. This is such a shameful thing, and I'm glad Joe Biden won points in last week's debate for his empathy and genuine outrage on the subject.
In the FT, I thought Stephen King was very keen on why the path of modern monetary theory ended in an inevitable reckoning. This is not a case of not taking on debt right now, but rather a case of not pretending that it will no longer matter at some point in the future. For me the trick is to make sure it's productive debt.
More of the FT with just eight days to vote. . .
Edward Luce answers
Rana, I prefer eggs, so I can't count chickens. Assuming that November 3rd and its aftermath lead to a Biden victory – say a jumbled one – the battle for the big jobs in his administration becomes public. Unfortunately for most hopefuls there are too many great personalities who do not pursue great jobs enough. Most will likely be disappointed. My bet for the Secretary of State would be Chris Coons. As a Senator in Delaware, Coons is close to Biden and has strong credentials to be America's best diplomat. His selection would mean a return to the status quo ante – centrist, moderate, and unlikely to challenge assumptions about an American-led world. Conversely, if Biden voted for Connecticut Senator Chris Murphy, it would signal a more radical change in foreign policy. Murphy advocates much of the progressive foreign policy that younger Democrats support. Other contenders include Susan Rice, Tom Donilon, Nick Burns, and Bill Burns. A wild card would be Samantha Power. I would expect Michéle Flournoy to lead the Pentagon. Pete Buttigieg could be a UN ambassador.
The other big openings – Treasury Department, Homeland Security, Attorney General – are harder to predict. If I had to bet, I'd pick Lael Brainard of the Fed for the Treasury Department and Preet Bharara for the Justice Department. Buttigieg could also be considered for the Department of Homeland Security. As always, personnel is policy. Who Biden chooses will tell us a lot about his priorities. My guess is that he's more willing to be radical domestically than in foreign policy. I would prefer him to be radical on both areas – as I hinted at in my column on Trump and Washington's foreign policy blob last week. But there are only so many fights a new president can choose from. Biden's all-consuming goal for the first few months would be to smooth the coronavirus curve. The rest is academic.
Who do you think should be in a Biden administration if the former Vice President wins the White House? Let us know at [email protected]
We'd love to hear from you. You can email the team at [email protected], contact Ed at [email protected] and Rana at [email protected] and follow them on Twitter at @RanaForoohar and @EdwardGLuce. We can publish an extract of your answer in the next newsletter.