A recent summer survey by Deutsche Bank explored what fund managers foresee happening to various US market and economic variables if there is a Republican victory in both the presidential race and control of Congress. This scenario, referred to as a ‘clean sweep’ or ‘red wave’, elicited strong opinions from respondents.
Most fund managers have a high conviction that deficits, inflation, yields, and equities would all increase under a Republican administration. In contrast, only a small minority, 4% and 5%, believe that deficits and inflation would decrease in this scenario.
The most contentious issue among respondents is the outlook for the US dollar. Opinions are divided, with 42% expecting the dollar to strengthen and 29% predicting it will weaken. This division likely reflects the conflicting Republican rhetoric that promotes the benefits of a weaker dollar and the practical economic policies, such as high tariffs and tax cuts, proposed by Trump.
These results provide intriguing insights into current market positioning and sentiment, which may evolve as the election approaches.
At the time of the survey, Kamala Harris had secured enough delegate votes for the Democratic nomination and was making significant progress in closing the gap that seemed insurmountable just a week prior. Consequently, the odds of a Republican ‘red wave’ have diminished compared to the previous week, indicating a rapidly changing and dynamic election landscape.
The events thus far in this election suggest an unpredictable and non-linear path to the final outcome.
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