The outcome of the U.S. elections remain difficult to predict and will likely be a tight finish. Given all the polls and surveys to date, if one had to pick a result today, it is hard not to back Biden. However, the issue at present is consensus appears to be pricing in a significant Biden win, with Democrats also taking the Senate by a majority. This has driven the reflation trade, which has been gathering momentum in recent months.

A clear majority in the Senate will allow the Democrats to push through extensive stimulus measures, without Republicans push back/blocks.

In assessing the two Presidential candidates, here is a summary of their policy differences.

Key Joe Biden Policies

• Personal tax rate will increase to 39.6% (from 37%) for incomes above $400,000.
• Increase minimum wage to $15.00 per hour.
• Corporate tax rate will increase to 28.0% (from 21%), including minimum 15% tax on U.S. companies with book profits of $100m or more.
• Continue to pressure China on environment and trade issues, however by applying pressure using a coalition of allies versus using tariffs.
• $400bn in Federal funds to purchase U.S. made goods.
• Rebuild relationship with key allies (particularly NATO alliance).
• $2.0 trillion investment fund for clean energy and infrastructure, including a key focus on climate change and clean energy & renewables.
• Targeting carbon neutral by 2050, including resigning the Paris Climate Accord.
• Provide tax credits for renewable energy and invest in automotive infrastructure (500,000 EV charging outlets).
• Push towards universal broadband (i.e. wireless via 5G).
• End long-term immigration detection and also provide a path to citizenship for currently illegal immigrants in the U.S.
• Increase the intake of refugees to 125,000.
• Increase health insurance coverage to 97% of the population.
• Reduce Medicare eligibility age to 60 years old (from 65 years).

Key Donald Trump Policies

• President Trump enacted several key policies in his first term, such as corporate tax rate cuts to 21%, personal tax cuts for individuals, imposed tariffs on Chinese goods, repealed parts of the Affordable Care Act and withdrew from the Paris Climate Accord.
• Extend personal and estate tax provided in the 2017 Tax Cut and Jobs Act. Look to reduce payroll and capital gains tax rates.
• Tax credits for companies bringing back positions to the U.S. (“Made in America”).
• Continue to target trade deals which put American jobs first.
• Continue with tariff-driven strategies, including tax incentives to bring back manufacturing jobs from China and imposing tariffs on goods from European Union.
• Is likely to announce significant infrastructure spend to the tune of $2.0 trillion.
• Invest in 5G networks.
• Continue to curb immigration, including deportation of non-citizen gang members and eliminating family-based immigration.
• Lower drug prices and reduce healthcare premiums.
• Seek energy independence (e.g. approved Oil & Gas drilling in Alaska which has not been drilled for many decades).

Under both candidates we will see additional fiscal stimulus, however the execution and size will be different.

In our view, the lack of stimulus deal pre-election has got to do more with President Trump noting wanting to provide budget bailouts to Democratic states. However, the size of fiscal stimulus will likely be much larger under Democrats.