Key Views:

  • Joe Biden leads Trump in election polls and the market is now expecting a “Blue Wave” of Democratic Party’s triumph over both presidency and senate. Based on this, we may see a new round of USD 2 trillion plus stimulus next year, which can drive the equity and commodity prices up further. Furthermore, inflation expectations may rise and lead to Fed slowing down or put a stop on loosening monetary policies earlier than expected.
  • However, with Biden winning the election, we may expect more uncertainties; whether there would be a smooth power transition in the White House, or whether the Democrats will be able to control the Senate. We may expect Trump to create some turmoil in US-China foreign relationships before the incoming president.
  • The Covid-19 pandemic in Europe and the US may worsen in autumn and winter, but its negative impact to the economy might be weaker as compared to the last wave as there are lower mortality rate among the younger infected population.
  • The Chinese domestic policies, both economic and foreign policies included, before and after the US election can be concluded as “Maintaining stability while observing changes”.
  • With the rising Chinese export data and stable infrastructure investments, the Chinese government has gained confidence in the economy and may not further stimulate domestic economic growth. Meanwhile, a new policy focus is to contain the asset price inflation, especially on a fast rising housing prices. As to the equity market, the policy focus is to prevent huge drastic volatility in the market.
  • We believe RMB will continue to be strong before the election. If Democrats victors with a sweep on both presidency and senate, the RMB may rise further. Otherwise, its upside will be limited.

About the Author

Dr. Hou Zhenhai
Straits Financial (China) Chief Strategist

1998 – 2004, Chief Representative Assistant of GKN Group in China.

2006, obtained MBA degree from Wisconsin School of Business at University of Wisconsin–Madison.

2006 – 2007, served at the Wisconsin Foundation.

August 2007 – July 2013, served at China International Capital Corporation (CICC) as the leader of the overseas strategy team and A-share strategy team. He is also the main report writer and contributor. Mr. Hou and his team received many honors including the top team for the New Fortune Sell-side Strategy Research in 2008, and the top team for the Asia Money China Strategy Research in Hong Kong in 2009 and 2012, etc.

September 2013 – December 2019, served at Discovering Group and was responsible for the Group’s macro strategy research. During the period, the company has accumulated absolute returns that far exceed the market level.

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