2024 US elections – rewind and repeat?
With less than a year to go until presidential elections, the starting gun has already been fired. Whilst all candidates are declared, the outcome of the vote and the tone of the campaign remain highly uncertain.
For the Democrats, the nomination of the outgoing President is in the bag. Joe Biden, who will turn 81 on 20 November, is standing as candidate. If he wins and holds office for the full term of his second mandate, he will be 86 when he leaves the White House – a new record!
On the Republican side, the primaries are currently underway and Donald Trump is emerging as the clear favourite. The plethora of criminal and civil cases against him are no hindrance to Trump’s run for the White House. With over 55% of the members of the Grand Old Party intending to vote for him[1] – 40% more than his closest competitor – we are shaping up for a remake of the 2020 duel. And it looks like it will be a close race; according to a CNN poll on voting intentions, Trump is now ahead of Biden, with 49% of votes versus 45% for the current occupant of the White House, should there be a contest between the two in 2024.
One thing is certain: the next president will have to deal with a very different economic environment than that prevailing during the previous two terms. If we exclude 2020 and the Covid-induced recession, the last two presidencies have benefited from robust economic growth, particularly low interest rates and practically full employment. This has come at the cost of a high deficit – close to 7% on average over the two terms. US government debt is forecast to rise to around 125% of GDP at the end of 2024 according to the IMF. And even if the US Federal Reserve (Fed) were to make several interest rate cuts by then – which is the consensus of economists and the debt markets – the cost of additional debt is likely to impose a certain level of fiscal restraint on the lucky winner. This would apply both to Donald Trump, whose 2024 programme is touting new tax cuts, and to Joe Biden, whose first mandate has been marked by lavish fiscal spending programmes.
In a tense international environment, with sombre economic prospects and Uncle Sam engaged in two wars by proxy, the economic consensus and the New York Fed put the risk of recession within the next 12 months at 55%. Political risk is therefore moving up the agenda for financial markets. In 2024, equity investors will have to deal with an additional ingredient – volatility.
Final version of 10 November 2023 – Clément Inbona, Fund Manager
[1] https://projects.fivethirtyeight.com/polls/president-primary-r/2024/national/