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Bob Mason
US Economy

The latest

At the time of writing, the total number of global COVID-19 cases had risen by 246,207 to 14,668,298 from Saturday.

Numbers from the U.S continued to deliver alarming news as the U.S administration pressed for the easing of lockdown measures.

It seems as though Trump is still in a hurry to get the economy churning again and at any cost. There should be no surprises as the U.S President had laid out his intentions earlier in the summer.

There may be the need for greater urgency, however, as the Presidential election campaign gathers momentum.

In the early days, the U.S President had talked of reuniting the Republican Party. COVID-19 and Trump’s desire to brush aside the risks of a more significant surge in new cases has some party members running for cover.

All of this has meant that Republican governors are now issuing their own directives that contravene those from the Oval Office.

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The Presidential Election Polls

Looking at the FT’s interactive Calculator and polling data, which are as at 19th July 2020:

Biden still has a projected Electoral College vote count of 308. By contrast to 15th July, however, the number of firm votes has fallen from 198 to 188. The number of votes leaning in Biden’s favor has increased from 110 to 120.

For U.S President Trump, his projected Electoral College vote count remains at 132. Leaning votes and solid votes remained unchanged at 17 and 115 respectively.

The number of toss-up votes has also remained unchanged at 98.

For Biden, he had a projected Electoral College vote count of 318 at the end of June.

The polls suggest that the spike in new COVID-19 cases across the U.S are not affecting Trump’s 2020 campaign…

U.S Equities and U.S Labor Markets

As the Republican Party begins to divide over COVID-19, the markets have yet to pay too much attention.

For the U.S economy, a more broad-based reintroduction of containment measures would be of greater significance.

The polls suggest that voters are more interested in improving labor market conditions and a pickup in economic activity. Coupled with record-high U.S equity markets, Trump may even see support build in the weeks ahead.

Year-to-date, the Dow was only down by 6.54% to Friday, 17th July, with the S&P500 down by just 0.19%. More impressively, the NASDAQ was up by a whopping 17.06%.

When considering tensions between the U.S and China and the impact of COVID-19 on the global economy, the resilience has been impressive.

Are the U.S equity markets and global markets banking on a Trump Presidential Election victory?

With the U.S President well behind Biden in the polls, the indifference may change. For the global financial markets, Trump had been market-friendly. The attacks on China and its impact on global trade, however, have been less than friendly.

The good news for Trump and the Republicans is that the EU has its own shortcomings.

A failure to agree on the dynamics of the EU Recovery Fund in 3 and a half days of meetings is one of many.

In contrast, Capitol Hill and the FED delivered bazooka after bazooka that has supported the equity market rebound and the U.S economic recovery.

The Stats

Last month, the U.S President was quick to hold a press conference in response to a 2nd record jump in nonfarm payrolls.

By contrast, the weekly jobless claims continue to paint a darker picture. In the week ending 10th July, initial jobless claims rose by 1.3m.

This time around it wasn’t good enough for the markets. If we see another 1.3m jump in this week’s figures, it may require some spin… Trump doesn’t need to lose more votes now.

It’s a quiet week on the economic data front. Other than Thursday’s jobless claims, prelim July private sector PMIs are key drivers.

The markets will get a better sense of what impact the spike in new COVID-19 cases has had on the economy. A more marked rebound in service sector activity is needed to support the optimism.

For now, the FED remains on guard and ready to deliver more support. Uncertainty will likely build over the Presidential Election outcome and policy, however. At that time, even the FED may have to hold back from delivering further support. Such an eventuality would be a bad outcome. Not just for the bulls but also for Trump’s election campaign…

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