While Tuesday’s chaotic "shitshow" of a presidential debate between Trump and Biden revealed absolutely anything about either candidate's core policies for the 2020-2024 period, it succeeded in raising analysts' concerns about a bitter election and reinforced the view of slim prospects for further stimulus. As noted earlier, S&P futures fell as the debate left investors concerned that the election would indeed be bitterly contested well into the end of 2020 and perhaps into early 2021, however they have since erased all losses.
This view was confirmed by Chris Weston, head of research at Pepperstone Group, who said that "what we’ve seen from the debate is the reinforcement that if Biden wins, Trump is not going to accept that. People positioned for an ugly contest afterwards have been validated....I don’t think we were expecting anything else from Trump. He continues to put that contested (result) risk premium back into the market.”
The confusion over the debate also meant confusion over who won. As Rabobank's Michael Every writes, a CBS flash poll had Biden winning 48 – 41, and the CNN poll was 60 - 28. Yet a WGN poll, which is less partisan, saw Trump win 60 – 40, and Telemundo (US Spanish TV) viewers showed Trump winning 66 - 34, all underlining that people see these things in very different ways. Rabo also quoted veteran Republican pollster Frank Luntz who tweeted that his sample group saw some undecided voters now convinced not to vote at all, with the most common refrain being "I’m so sad for our country."
Every also addressed the last question of the evening on the legitimacy of the upcoming election process, where Trump said "This will not end well," talking of no winner for months, which "concluded the evening under the darkest cloud, suggesting political risk will linger on in the market’s mind."
Discussing the direct outcome of the debate, the Rabobank strategist writes that "it seems incredibly unlikely that Trump’s performance will have won back any of the wealthy suburban voters who are migrating from the Republicans to Biden. However, the larger question is if the same performance will stop a more than matching shift towards him from working class and rural voters, according to some deep-dive data, a demographic who don’t get surveyed by headline-style pollsters much, or who won’t answer when asked. Only time will tell if this is an abnormal ‘normal’ election, or one of major US political realignment."
Others agreed that the debate was nothing less than a dumpster fire: "The debate just added to the confusion about how the election will run," said SEB investment management’s global head of asset allocation Hans Peterson. "But financially it doesn’t change anything."
"The share market normally prefers the incumbent (president) to win,” said Shane Oliver, head of investment strategy at AMP Capital in Sydney. “U.S. futures initially rose, as perhaps Trump delivered some punches, but it wasn’t enough."
Meanwhile, Deutsche Bank's Jim Reid writes that "in a raucous debate that was indeed full of shouting, it is unclear that either President Trump or Vice President Biden changed the trajectory of the election last night. The President came into the night down -6.8% in the fivethirtyeight.com national polling average while trailing in many of the battleground states, and we will track how polls change in the next few days. There was very little substance in the debate and almost no new information proffered. The story of the debate will likely surround the President’s consistent interruption, though Mr Biden was not able to stay above the fray and traded insults at times with Mr Trump. Acrimony ruled."
Below, courtesy of Bloomberg, are several other reactions from Wall Street analysts:
AGF Investments, Greg Valliere
- "Chilling comments by Trump on a ‘rigged’ election reinforced our belief that he will go all the way to the Supreme Court if it looks like he narrowly lost,” Valliere wrote in a note.
- "The markets have to brace for weeks of uncertainty,” Valliere warned, as a protracted stalemate may lead to civil unrest, noting that “Trump didn’t make any effort last night to calm his far-right supporters.”
- He added that “Friday’s unemployment report might show that the summer economic recovery is running out of steam," and that he believes the economy needs more fiscal stimulus, though a “deal is more likely to come later rather than sooner."
Raymond James, Ed Mills
- "If you found the first Presidential Debate informative or productive, please reach out, because we are at a loss,” Mills wrote.
- Though continuing negotiations on fiscal relief are positive, “this debate will add a new political hurdle,” while questions on election fraud “will add to concerns about a volatile post-election period if there is a close or uncertain electoral outcome."
- Mills flagged discussions on health care, Covid, the economy, climate, civil unrest, fiscal relief, and the integrity of the election, with Biden reiterating his support for raising the corporate tax rate to 28% and ensuring that large profitable companies don’t use the tax code to prevent any tax liability.
Cowen, Chris Krueger
- Krueger wrote that he disagrees with the "notion that debate was a dumpster fire: by definition, dumpster fires are contained."
- Biden cleared the low hurdle Trump set with “Sleepy Joe,” he said; "was it Romney vs. Obama in the first 2012 debate? No. But he didn’t fall off the stage like Bob Dole in the 1996 race either. So that — in 2020 — is a win."
- He doesn’t see the election’s trajectory changing, as each side’s bases were appeased, and called another stimulus deal “very unlikely.”