Money
and capital markets fluctuated following the news that US President Donald
Trump had been diagnosed with coronavirus (COVID-19). Risky assets experienced
sell-offs, while the direction of the US Dollar was mixed (it largely
depreciated against the Yen but appreciated against other currencies).
KResearch
views that President Trump’s illness may not significantly affect his
popularity as a candidate for the 2020 US presidential election, because the
contest is between two political parties, each with completely different
policies and standpoints. Therefore, Americans, who tend to remain loyal to
their political party of choice, may not change their minds on whom to vote
for. However, more undecided American voters may lean towards Mr. Joe Biden,
the Democratic presidential nominee, following the first presidential debate.
In addition, it is highly unlikely that Mr. Biden’s supporters would switch to
supporting President Trump just because they are concerned about the President’s
health.
The
key variable before the US presidential election will be President Trump’s
illness. If his symptoms become severe, the Republican Party may not be able to
easily change their candidate due to the limited timeframe and the selection
process. Otherwise, if President Trump recovers from his illness, the key variable
will switch back to being the conclusion of the election results and who the person
to serve as the next president will be. The process might be protracted until
January 2021, as President Trump has previously declared that he will not
accept the election results if he loses.
Although
the uncertainty from the pre- and post-election variables will have an
inevitable impact on the money and capital markets, KResearch views that the
Federal Reserve (Fed) will monitor the US presidential election results and may
consider monetary tools, or may ease its monetary stance at an appropriate time,
should there be any political issues affecting the US economic recovery.
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