What will happen after the election in the USA?

If you have not received a call from Cyril Ramaphosa offering you a cabinet post, then you are one of only a few. It seems he just couldn’t let anyone go, but with this new arranged marriage called the GNU, he had to accommodate his ten wives and offer them a fat ministerial paycheck compliments from you, the taxpayer.

Anyway, let’s move on to a circus of a different nature, the U.S. elections. If you watched the cringeworthy presidential debate between Biden and Trump on the 27th of June, you will know that the USA is in serious trouble. The first question you ask yourself will be “How is it possible to have those two as the only candidates?” and the next question should be “How will this impact my investments?”

To answer this question we have to start by looking at the current situation in the US. It is clear that Joe Biden is not making any decisions regarding policy and his advisors are the ones calling the shots. If this is the case, things will carry on as they are now if he wins a second term. The bigger impact on policy will be if Trump gets elected. As we know, Donald Trump is a very forceful character. He will most probably increase import tariffs from China; lower taxes on companies registered in the USA – or at least not increase them as is Biden’s intention; clamp down on immigration; withdraw funding for NATO; and stop support for the Ukraine.

All of these are inflationary. So the impact will be for the dollar to remain strong; for wages to go up; for interest rates to stay higher for longer; and worst of all, for the morbidly obese national debt to get even bigger. Currently the USA is able to support their high debt because the dollar is still the most widely used currency in the world. This should remain the situation for a while longer but if Donald continues on his path of alienating China, we might see an alternative to the US$ – which will have a material impact on the USA to afford their high debt.

The long and the short of it all is that under Trump we will see inflation at elevated levels, which will mean that interest rates will remain high, which in turn will be negative for bonds and equities but positive for cash. The only saving grace for equities will be the accelerated productivity and growth Artificial Intelligence can bring to companies, which will support their share price.

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