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A Super Tuesday for Biden

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After lagging badly in previous contests, Joe Biden enjoyed a strong comeback on Super Tuesday, putting him right back in the race for Democratic Presidential candidate. Download the full article above to learn more. 


  • After lagging badly in previous contests, Joe Biden enjoyed a strong comeback on Super Tuesday, putting him right back in the race for Democratic Presidential candidate.
  • The early frontrunner, Bernie Sanders, performed much less well but remains a strong contender. It seems that Biden and Sanders will fight state by state all the way up to the National Democratic Convention in July.
  • Biden is generally seen as more market friendly than Sanders.
  • This comes at a time when President Trump’s approval rating is near the highest it has been. Whether this will persist up to the Presidential Election in November will be key, especially with currently rising economic risks.
  • For investors, our advice has not changed. If you have focused on portfolio diversification you will be best placed to weather any uncertainty. If you are still exposed to risky assets future market volatility with near term rallies would present better opportunities to diversify.

Biden storms back on Super Tuesday

Just over a week ago, former Vice-President Joe Biden’s campaign to be the Democratic candidate in this year’s Presidential election looked doomed to failure. For example, he had severely lagged in the Iowa caucus and New Hampshire primary (where he came fourth) and simply did not seem to be able to build a coalition of voters. Indeed, most of the focus had switched firmly to Bernie Sanders as the frontrunner who would continue to build momentum as the primary bandwagon rolled on. A big test of this theory came on Super Tuesday, when over a third of all available delegates are awarded and the results have altered the landscape significantly!

At the time of writing, votes are still being counted in California, where Bernie Sanders looks set to win, and in Texas, but the big news is that Joe Biden has staged a major comeback. He has won 9 of the 14 major primaries, including in all likelihood Texas, taking the lion’s share of available delegates and bringing his campaign right back into contention in the race to be Democratic candidate. He swept the Southern states and won in several states that he hadn’t even visited but the Texas win, which awards the second largest number of delegates of the night, was the biggest surprise. In contrast, Bernie Sanders looks set to win in California – the biggest prize of the night – implying that, while Joe Biden now has valuable momentum, Sanders will not be going away soon.

In the detail, there were a number of trends that stood out. Firstly, Joe Biden proved very popular with African American voters (he won 70% of this community’s votes in Alabama, for example), whilst Bernie Sanders performed well with Latino voters (he won more than double the Latino vote in California than Joe Biden). Secondly, although women tended to vote with higher proportions for Elizabeth Warren, Joe Biden received more votes from women than Bernie Sanders (26% of college educated women versus 21%, for example). Thirdly, Joe Biden did better with older and more moderate voters whilst Bernie Sanders did better with younger and more liberal votes. Finally, a large proportion of voters made up their minds very late and opted for the candidate that they saw as most likely to defeat President Trump.

Indeed, the last-minute decision-taking was one reason why the polls did not predict Biden’s surge. If this kind of decision-making continues and the turnout for younger voters is relatively low, as it seems to have been on Super Tuesday, this would boost Joe Biden’s prospects.

The extent of the rapid change in the landscape can be seen by the huge moves in betting odds over the past 10 days. According to Real Clear Politics, which compiles betting odds from several external companies, the implied probability of Joe Biden winning the Democratic nomination on February 23rd – the day after the Nevada caucus – was only 9.9% versus Bernie Sanders’ 57.3%. Today, Joe Biden’s implied probability has surged to 63.1% versus Bernie Sanders’ 34%. This is partly based on the history of Super Tuesday results. In 17 out of 18 Super Tuesdays since 1984, the winner has ultimately become the Presidential nominee for their party.

Meanwhile, it does seem like the Democratic race will be a two-horse race as other prominent candidates, such as Elizabeth Warren performed poorly, and Michael Bloomberg has now suspended his campaign and endorsed Joe Biden.

Two quite different candidates

Bernie Sanders has described himself as a democratic socialist and as a true change candidate. His list of policies includes Medicare for all, the write-off of medical and education related debts, a Green New Deal, which targets fossil fuel companies and supports the transition away from a carbon-based economy, various policies aimed at promoting equality of pay and opportunity, including increased unionization, the break-up of the major banks and caps on credit card and consumer loan rates. This would be paid for by a tax on extreme wealth, a progressive tax on multi millionaire or higher inheritances and a tax on speculative financial transactions, amongst other measures.

These policies have clearly gained traction amongst some sectors of the US electorate, especially younger cohorts, and can reasonably be seen as part of a global movement towards radical economic reforms, both on the left and right wing. However, many of these polices also threaten the profits and business models of some of the largest companies and employers in the country. The arguments about the balance between societal transformation and disruption to economies will rumble on and will quickly move into political territory but it would be reasonable to assume that equity markets would be concerned about some of Bernie Sanders’ policies.

In contrast, Joe Biden has built his campaign on being the stability and “decency” candidate. His policies include rolling back President Trump’s tax cuts for the rich, expanding the coverage of the Affordable Care Act (he does not support Medicare for all), raising corporate and capital gains taxes but not significantly above the average of previous years or other developed countries and increasing the minimum wage. From the perspective of markets, Joe Biden’s policies seem much less radical.

Some have said that, given President Trump is a generally unpopular president, the Democratic candidate would have a great chance of ultimately becoming President, but we do not think it is anywhere near as clear cut as this.

President Trump's personal rating near a high

Partly due to the continued improvement in the labor and stock markets over 2019 and partly due to the signing of the “Phase 1” trade deal with China, the President has seen his approval ratings rise to its highest level since he came to office.

What happens between now and the election on November 3rd is not necessarily clear, of course, but there are two factors that could be important. Firstly, with a few notable exceptions, the vast majority of incumbent Presidents have served for two terms. The incumbent’s power is enduring and quite resistant to controversies. Indeed, there is a huge disparity between the ratings for the President from Republicans and Democrats, which indicates the degree of polarization in the electorate and very likely in the election itself. It may well not matter that Donald Trump remains one of the least popular Presidents in recent history for the nation at large.

Secondly, and possibly running counter to this, the President’s rating and, therefore, chances in the election are very much linked to the health of the US economy. Things looked quite good on this front until very recently but the outbreak of the coronavirus, along with the sharp falls in equity markets, have threatened this scenario now. Many forecasters have been rapidly cutting their outlook for economic growth for this year in the anticipation of significant disruption over the coming months. For us, it is very difficult to predict the evolution of the virus and its ultimate economic impact. However, it does raise the stakes for President Trump and his Administration’s response could play a significant part in his chances for re-election.

Politics could be overtaken by events

Bringing everything together, we expect a continued head to head race between Joe Biden and Bernie Sanders, possibly all the way up to the Democratic National Convention in the week of July 13th. In the meantime, President Trump will be focused on the health of the economy (and the nation itself) as he will identify, probably quite rightly, that his chances of re-election are more linked to this than his Democratic opponent.

In terms of scenarios, it seems that the most challenging outcome for markets would be a sharp economic slowdown and a win for Bernie Sanders in the Presidential election, as this would probably create the biggest headwinds to corporate profitability. A re-election for Trump would be most market supportive, whilst a Biden victory would lie somewhere in between, with some degree of equity market headwind but not as significantly as the Bernie Sanders scenario.

Given historical experience and the growing endorsements for Joe Biden, it does seem that he is now the frontrunner but things can change once again in the upcoming contests. But, how could Bernie Sanders make a comeback of his own? Looking at the polls, he will definitely need to rally the younger, liberal voters and persuade them to vote in large numbers – this is easier said than done in some primaries, where the demographics are against him. It would also be good for his campaign to pick up more of the female and African American vote but the suspicion is that his natural voters will not expand too much from here – he will simply need to get them all to vote!

Investment Implications

For investors, our advice has not changed. If you have focused on portfolio diversification and reducing the reliance on equities over the past year, you will be best placed to weather the possible storm of a global economic slowdown, should it occur. If you are still exposed to risky assets, it may be costly to make large adjustments now and future market volatility with near term rallies would present better opportunities to sell.

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