At the time of writing, it still remains to be seen as to who will win the United States election. In the midst of the process, the temperature of the nation has become feverish with protests ranging from the electoral system itself to the validity of mail votes and late counting. Meanwhile, the incumbent president has initiated a slew of court cases as the voting tally increasingly favours a Biden victory. This time around, election fever is likely to rage long after the result is announced, with Trump unlikely to leave the White House quietly. Moreover, if the current vote count trends continue, the Senate will remain under the control of the Republicans, presided over by a conservative court.
Global stock markets appear to also have been struck with election fever, supposedly on the belief that a decisive win will reduce the possibility of a drawn-out legal contest, as well as that the prospect of a Republican Senate will reign in Biden’s proposed tax hikes. The S&P closed yesterday less than 2% from its all-time high, having surged 7.35% since the beginning of November, whilst ‘‘risk-on” sentiment and dollar weakness also strengthened emerging market currencies. However, markets will still need to figure out how Biden’s policies are likely to be implemented, especially with regards to climate change, union rights, and his “tough on China” stance. Indeed it seems it will take yet awhile for the US election fever to abate.
Meanwhile, an election fever of a different strain rages in Africa, where incumbent presidents in Uganda, the Ivory Coast, and Tanzania have manipulated their respective constitutions to remain in power through the repression of human rights and civil liberties. Regrettably, there is no apparent short-term panacea for this lingering type of fever that has afflicted many countries on the continent, with South Africa being a notable exception!
“It is often when night looks darkest, it is often before the fever breaks, that one senses the gathering momentum for change, when one feels that resurrection of hope in the midst of despair and apathy.”
– Hillary Clinton, the unsuccessful Democratic candidate for the 2016 US Presidential Election
“The only sure bulwark of continuing liberty is a government strong enough to protect the interests of the people, and a people strong enough and well enough informed to maintain its sovereign control over the government.”
– Franklin D. Roosevelt, President of the United States from 1933 – 1945
- Vice President Biden has inched closer to victory, taking the lead in Georgia. Georgia carries 16 electoral votes, and were Biden to win it, his electoral votes would tally 269, just one vote away from the Presidency.
- Just as imminently ominous to Trump’s prospects for victory, is that Biden is now ahead of him in Pennsylvania, another key swing state.
- As of Friday, Biden has 50.5% of the popular vote (73,488,248), compared to 47.8% for President Trump (69,622,407), but these numbers will change as more votes are counted. However, the popular vote alone is not what wins US elections. Biden is currently leading the electoral college vote 264 to President Trump’s 214.
- Trump’s legal team has been in courtrooms across the country, challenging vote counts and demanding the right to send supporters into ballot-counting stations.
- Trump has continued to falsely argue that ballots that haven’t yet been counted are illegal. According to the New York Times, “he has marshalled the optics of the presidency to his advantage even as he unleashed a string of falsehoods intended to undermine a legitimate election.”
- From the above trend analysis, it would seem that Vice President Joe Biden is headed towards victory in the US election. But what would this victory mean? Increasingly likely is that the election will be contested, and that there will be a Biden Presidency with a Republican Senate, which will carry the inheritance of gridlock from the Obama administration. Follow this link for more on the potential scenarios.
- The result of the US election is still not conclusive, however, what has become clear is that win or lose, the President will not go down quietly. What is of major concern is that President Trump may use his remaining days in office (76 days if he loses) to seek vengeance on adversaries – for more on this, follow this link.
- The uncertainty surrounding the election has caused volatility in financial markets over the last two weeks. The S&P 500 futures are currently trading 6.5% higher than where they closed last Friday, as equity markets rallied strongly on the possibility of a combination of a Biden Presidency and a Republican Senate – deemed a market-friendly stalemate situation that would prevent sweeping tax hikes and potential socialist reform. The futures are, however, only 0.75% higher than where they closed two weeks ago, as the markets had sold off heavily in advance of the election.
- In another symptom of election fever, social media platforms, Facebook and Twitter, found themselves in hot water this week over unconfirmed election victory reports. The platforms announced that measures would be put in place to monitor this, causing some political organisations to move away from the larger social media outlets to messaging through texts and live streams, which have much lower levels of policing and transparency.
- In Uganda, Bobi Wine, a popular singer and opposition presidential hopeful, was arrested after he registered to challenge President Yoweri Museveni in the upcoming 2021 elections. Museveni has been in power since the 1980s, this being just another example of the barriers blocking opposition leaders in African countries.
- The President of the Ivory Coast, Alassane Ouattara, has been re-elected with more than 94% of the vote. The election was met with clashes and an opposition boycott over Ouattara’s decision to run for a third term. The landslide victory was anticipated due to the opposition’s boycott of the election.
- Tanzanian police have arrested Freeman Mbowe, the leader of the main opposition party, Chadema. Mbowe was the party’s candidate in last week’s presidential election. Since the election, the opposition has demanded a do-over, citing widespread irregularities and calling for protests against the outcome.
- Caught up in the US election fever, the South Africa rand has reached its strongest trading levels since prior to the Covid-19 sell-off. The rand is gaining strength in line with other emerging market currencies on a weaker dollar, rather than on the back of South African specific factors. Bear in mind that South African specific factors include: SARS’s revenue shortfall in excess of R300bn this fiscal year; the R500bn increase in spending on Covid-19 support; an estimated 15% budget deficit; the forecast for Debt to GDP to rise to 95% in the next three years despite the “active” scenario of decreasing spending by freezing civil servants wages; and the fact that South Africa no longer has an investment-grade credit rating. Given the seemingly permanent deterioration in the South African fiscal position, our currency models point to continued rand strength being unsustainable over the medium term. Current exchange rate levels should therefore be seen as an opportunity to externalise funds in order to diversify portfolios away from South African risk, as well as to expose clients to a broader global opportunity set.
Sources: Dynasty, Reuters, Bloomberg Markets, The New York Times, Daily Maverick, and Moneyweb, etc