What does the Trump vs. Biden presidential debate mean for markets?

Who’s the favourite to win? Does the presidential debate even matter? Who’s the investor favourite - Trump or Biden and how will markets react? 
US President Donald Trump debates former Vice President Joe Biden on Tuesday September 29th, 9-10.30pm E.T.

Who’s going to win the debate?

There is an interesting divergence between punters and bookmakers, not for the first time with US President Trump. These are the odds and betting data from Oddschecker.


UK Odds Implied Probability % Of Bets This Week
Joe Biden 4/11 73.3% 35%
Donald Trump 2/1 33.3% 65%


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Bookies have Biden as a strong favourite but most of the bets are going for Trump.
Election polls taken after the first debate between Donald Trump and Hilary Clinton in 2016 showed Trump lose 2%, while Clinton gained 2%. It was a notably lame  performance from Donald Trump who typically doesn’t prepare and he was outmanoeuvred by a well-prepped Clinton. Biden will have had extra time to prepare because of the minimal campaigning he has done due to COVID restrictions.

Does the debate matter?

All the experts say no- it doesn’t statistically seems to impact people’s voting intensions, however there are some reasons to think it could this time. 
Biden has not made many public appearances since the pandemic started, while Trump is in the media regularly and on Twitter daily. That makes it a more impactful event for Biden than for Trump. After four years, the electorate already know Trump but any big goofs from Biden have a greater impression on people’s opinion of him. 
Biden’s campaign seems to be premised on the idea that Donald Trump is his own worst enemy. It is the idea that people just want any alternative to Trump after four years and a recession. That works while Biden is on the sidelines but not on centre stage in the debates. Given that it appears to be Biden’s election to lose, we’d expect a relatively cautious display- however that could open him up to abuse from the President.

Which candidate is better for investors?


Issue Trump Biden
Taxes X  
Speed of economic recovery X  
China trade war   X
Government trifecta X  
fiscal stimulus   X
There are lot of policy areas in which Trump and Biden may diverge but we have highlighted taxes, the speed of economic recovery, the China trade war and the chance of one party controlling both the executive and the full legislative branch and fiscal stimulus. By our estimates Trump has three out of five of the big issues facing financial markets.
Taxes are probably the clearest cut. Goldman Sachs estimates Biden’s plan to undo Trump’s corporate tax cut would take 12% off 2021 earnings in the S&P 500. If Biden won, an agreement is more likely to be reached with Congress on a stimulus package- and it would likely be bigger than the ‘targeted’ package Republicans want.
Assuming we are correct that Trump is a more market-friendly candidate, markets might not reflect that if he wins the debate.

How will markets react?

National polls are showing Biden with about a 7% lead over Trump and betting markets have Biden at 57% to win. Both of these were famously wrong four years ago when Trump took the presidency so should be taken with a gain of salt. Still, as an investor, unless you are doing your own private polling- this is all you have to work with. The assumption you need to make is that Biden is going to win the election of November 3rd.
If investments are being made based on the idea of a Biden presidency, then those investments need to be adjusted if the odds of a Biden presidency change. One example of this could be the Chinese yuan. USD/CNH had its worst quarterly performance on record in Q2 partly on hopes that Biden presidency will be more lenient on China.
Add to that the increased possibly of a contested result. A tight Election Day result with lots of uncounted postal votes could mean we don’t find out the election result for weeks. The resulting political deadlock would likely mean an even longer wait for the next much-needed US stimulus package. 
A strong debate performance from Trump increases the chance of post election-uncertainty without a clear winner and a bigger delay before stimulus. That all suggests a move towards risk-off if Trump comes out on top in the debate- meaning a strong USD and Treasuries, weak stocks, euro and gold.

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