US elections 2020: history in the making - LGT - VALUES WORTH SHARING LGT Private Banking Asia, October 2020
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US elections 2020: history in the making LGT – VALUES WORTH SHARING LGT Private Banking Asia, October 2020
US elections 2020
Counting down to the US elections…. one week to go.
Source: stock.adobe.com, LGT, October 2020 October 2020 2
© LGT Private Banking
US elections 2020
Three basic scenarios for the November elections
Blue Wave Divided Government Red Return
Democrats win the White House No party emerges as outright Republicans win the White
and Congress winner, controlling both White House and Congress
House and Congress: Gridlock
Tax cuts for middle class Sustain current tax regime,
No major changes to tax policy maybe cut more
Tax increases for higher income and regulation
Americans and companies More overall spending
More overall spending
Source: stock.adobe.com, LGT, October 2020 October 2020 3
© LGT Private Banking
US elections 2020
The economy is at the very top of voters' minds
US poll: registered voters saying
this issue is "very important", %
100
80
60
40
20
0
Economy Healthcare Supreme Court Covid-19 Crime Foreign Policy Gun Policy Racial Inequality Immigration
Source: Société Générale, LGT, September 2020 October 2020 4
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US elections 2020
US voters are very focused on who wins the 2020 elections
"How important is this election, depending on who wins?" (in %)
100
80
60
40
20
0
2000 2004 2008 2012 2016 2020
It really matters who wins Things will stay more or less the same
Source: Société Générale, LGT, September 2020 October 2020 5
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US elections 2020
US housing market's robust recovery is impressive
US: pending home sales index US: construction employment,
1000's of people
140 10,000
130 9,500
120 9,000
110 8,500
100 8,000
90 7,500
80 7,000
70 6,500
60 6,000
2005
2015
2001
2003
2007
2009
2011
2013
2017
2019
2003
2001
2005
2007
2009
2011
2013
2015
2017
2019
Source: National Association of Realtors, Bureau of Labor Statistics, LGT, October 2020 October 2020 6
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US elections 2020
US 30-year fixed rate mortgage rate below 3.00%!
Freddie Mac 30-year mortgage rate, %
20
18
16
14
12
10
8
6
4
2
0
1971
1975
1979
1983
1987
1991
1995
1999
2003
2007
2011
2015
2019
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
2017
Source: Freddie Mac, LGT, September 2020 October 2020 7
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US elections 2020
China overtakes the Eurozone in terms of global GDP share
Nominal share of global GDP, %
40
35
30
USA
25
20 China
Eurozone
15
10
5 Japan
0
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Source: Citigroup, LGT, October 2020 October 2020 8
© LGT Private BankingUS elections 2020
China: consumer spending normalises during Golden Week
RMB millions Millions of people
5,000 150
4,000 120
3,000 90
2,000 60
1,000 30
- -
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Box office revenue, lhs Cinema admissions, rhs
Source: Citigroup, LGT, October 2020 October 2020 9
© LGT Private BankingUS elections 2020
However, US labour market recovery could be faster…
US: weekly initial unemployment claims, US: continuing unemployment claims,
1000's of people millions of people
8,000 30
7,000
25
6,000
20
5,000
4,000 15
3,000 10
2,000
5
1,000
0
0
2019
2010
2011
2012
2013
2014
2015
2016
2017
2018
2013
2018
2010
2011
2012
2014
2015
2016
2017
2019
2020
Source for both charts: US Department of Labor, LGT, October 2020 October 2020 10
© LGT Private BankingUS elections 2020
Fed's new Flexible Average Inflation Targeting regime
US: core inflation, monthly, y/y % change
3.5%
3.0%
2.5% 'acceptable'
overshooting
2.0%
Target level
1.5%
1.0%
0.5%
0.0%
2004
2008
2012
2018
2022
2001
2002
2003
2005
2005
2006
2007
2009
2010
2010
2011
2013
2014
2015
2015
2016
2017
2019
2020
2020
2021
Source: US Department of Labor, LGT, September 2020 October 2020 11
© LGT Private BankingUS elections 2020
US federal budget deficit surging to peace time new records
US: federal budget balance, billions of USD
500
0
-500
-1000
-1500
-2000
-2500
-3000
Source: US Bureau of the Fiscal Service, LGT, September 2020 *year to date through to August 2020 October 2020 12
© LGT Private BankingUS elections 2020
The example of France: V-shaped recovery amid rising Covid-19
infections, but with far lower mortality rates than in March
France: retail sales index, France: Covid-19 7-day moving average of
ex motor vehicles case and fatalities
120 30,000 1,600
1,400
25,000
110 1,200
20,000
1,000
100 15,000 800
600
10,000
90 400
5,000
200
80 0 0
Jul-20
May-20
Jun-20
Apr-20
Mar-20
Feb-20
Aug-20
Sep-20
Oct-20
70
2012
2017
2010
2011
2013
2014
2015
2016
2018
2019
New cases, lhs Deaths, rhs
Source: Institut national de la statistique et des études économiques, World Health Organisation, LGT, October 2020 October 2020 13
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The popular vote does not get you elected to the White House
Source: stock.adobe.com, LGT, October 2020 October 2020 14
© LGT Private BankingUS elections 2020
Donald Trump won the Electoral College in 2016,
but lost the popular vote by 3 million votes
Electoral College votes Popular Vote outcome, millions
350 67
300 66
270 needed to win
250
65
200
64
150
63
100
50 62
0 61
Donald J. Trump Hillary Clinton Donald J. Trump Hillary Clinton
Source: Deutsche Bank, LGT, September 2020 October 2020 15
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2020 electoral college mapping favours the Democrats
The Battleground States
Solid Democrat Toss-Up Solid Republican
188 24 78 61 62 48 77
California Colorado Arizona Iowa Alabama
Connecticut Maine* Georgia Ohio Arkansas
Delaware Nevada Maine* Texas Idaho
Washington DC Virginia North Carolina Kentucky
Hawaii Louisiana
Illinois 270 votes to win Mississippi
Maine* Nebraska*
Florida
Maryland North Dakota
Michigan Alaska
Massachusetts Oklahoma
Minnesota Indiana
New Jersey South Dakota
Nebraska* Kansas
New Mexico Tennessee
New Hampshire Missouri
New York West Virginia
Pennsylvania Montana
Oregon Wyoming
Wisconsin South Carolina
Rhode Island Utah
Vermont
Washington State
*Forty-Eight states and Washington DC allocate their votes on a winner-takes-all basis.
Maine and Nebraska award on a proportional basis, according to congressional district.
Source: Deutsche Bank, LGT, September 2020 October 2020 16
© LGT Private BankingUS elections 2020
Polls suggest Biden's advantage over Trump has increased
Real Clear Politics 2020 US Presidential General Election Average Poll, %
54
52
50
48
46
44
42
40
38
Jul-20
Jun-20
Apr-20
Mar-20
Nov-19
May-20
Dec-19
Jan-20
Feb-20
Aug-20
Sep-20
Oct-19
Oct-20
Trump Biden
Source: Bloomberg, Real Clear Politics, LGT, October 14 2020 October 2020 17
© LGT Private BankingUS elections 2020
A contested election may end up in the Supreme Court
Breyer Barrett**
Sotomayor Gorsuch*
Kagan
Roberts Kavanaugh*
Alito
Thomas
The current Supreme Court has voted four times against
expanding voters' rights. As such, the Court leans conservative.
*Justices appointed by President Trump.
**Potential further appointment by President Trump.
Source: stock.adobe.com, Citigroup, LGT, September 2020 October 2020 18
© LGT Private BankingUS elections 2020
Close elections tend to see initial market weakness, then a rally
S&P 500 around close presidential elections (rebased January = 100)
115
Election Day
110
105
100
95
Jan Feb Mar Mar Apr May Jun Jul Aug Sep Oct Nov Dec
*5 day moving average of the mean of 1968, 1976, 2004, 2012 and 2016 presidential election years, daily time series.
Source: Deutsche Bank, LGT, September 2020 October 2020 19
© LGT Private BankingUS elections 2020
Earnings set to recover in 2021 as capex has a V-shaped rebound
y/y % change y/y % change
160 30
forecast
120 20
80
10
40
0
0
-10
-40
-80 -20
-120 -30
2003
2007
2011
2015
2000
2001
2002
2004
2005
2006
2008
2009
2010
2012
2013
2014
2016
2017
2018
2019
2020
2021
global earnings, lhs global capex ex China, rhs
Source: JP Morgan, LGT, September 2020 October 2020 20
© LGT Private BankingUS elections 2020
Equities look particularly cheap relative to corporate debt
% of companies with dividend yields higher than corporate bond yields
100%
80%
60%
40%
20%
0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Euro Stoxx 600 S&P500
Source: Goldman Sachs, LGT, September 2020 October 2020 21
© LGT Private BankingImportant Note (I/II)
This document is issued on request and provided for information purposes only. It does not constitute investment advice, nor is it to be construed as an offer, recommendation, or
solicitation to enter into any transaction or to adopt any hedging or investment strategy, in respect of any securities, funds, structured products or any other financial instruments
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The financial instruments mentioned may not be suitable for, or available to, every investor. Potential investors should refer to the relevant offering documents and other product
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investment objectives.
October 2020 22
© LGT Private BankingImportant Note (II/II)
This document is for distribution solely to persons permitted to receive it and to persons in jurisdictions who may receive it without breaching applicable legal or regulatory
requirements. In particular:
• in Hong Kong, this document may be issued by either (a) LGT Bank AG, Hong Kong Branch which is an authorized financial institution regulated by the Hong Kong Monetary
Authority and the Securities and Futures Commission (“SFC”) or (b) LGT Investment Management (Asia) Ltd. which is a licensed corporation regulated by the SFC, and is intended
for distribution, (i) only to professional investors within the meaning of the Securities and Futures Ordinance (Cap 571) and any rules made under that ordinance; or (ii) in other
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the express consent of LGT. Copyright, LGT. All Rights Reserved.
October 2020 23
© LGT Private BankingPicture description
"Teapot with Lid", c. 1725
DU PAQUIER PORCELAIN MANUFACTORY
1718–1744
Teapot of high cylindrical shape applied with a spout in the form of a dragon clinging to
the side, and a handle in the form of a lizard descending, the cover with a recumbent
lion knop, painted in Schwarzlot heightened in gilding with two fields of chinoiserie
figures enclosed by continuous scrolling foliage and strapwork. The shape is based on a
Chinese blanc de Chine vessel of the Kangxi period (1662–1722) that was probably used
for wine.
© LIECHTENSTEIN. The Princely Collections, Vaduz-Vienna
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