On Thursday, President Donald Trump held a town hall meeting instead of attending the second presidential debate. The event was scheduled at the same time as Joe Biden’s town hall, covered by my colleague at InvestorPlace.com, Sarah Smith.
Here at InvestorPlace.com, we recognize that the 2020 election will have wide-reaching consequences that extend beyond economic policies. With over 1 million worldwide deaths from Covid-19, the economy in a severe contraction, and U.S. race relations at its worst since the early 1990s, countless humanitarian issues will matter this election.
But economic policies will also count. That’s because financial strength can help cover a multitude of sins. Flagging economic power, meanwhile, often leads to civil unrest and unraveling.
With just two weeks to go until November’s election day, here are five takeaways from last night’s town hall.
Investing Takeaway #1: Donald Trump Hasn’t Made Inroads to Swing Voters
While Mr. Trump didn’t say anything that would alienate his voter base, he didn’t say much to excite existing swing voters.
And that matters.
Mr. Trump faces an uphill battle to cut into Joe Biden’s lead. Polls have shown Mr. Trump trailing at almost a ten-point deficit; Fivethirtyeight, a political analysis blog, now puts the Republican President’s chances at re-election at 15%. That’s the same chance as a newborn living until age 90 – a possibility, but not a certainty.
By avoiding swing topics, such as climate change or race relations, and resisting denouncing QAnon, the president has indicated he’s more interested in getting Republicans to turn out to vote.
Investing Takeaway #2: Staying the Course on Coronavirus
The Town Hall meeting kicked off with “TODAY” anchor Savannah Guthrie grilling Mr. Trump about mask-wearing and Covid-19 testing in the White House. The photos of non-mask wearing attendees caught Mr. Trump on the back foot.
“The cure cannot be worse than the problem itself,” Mr. Trump said. “We did the right thing.” Rather than shutting down the economy again, turning cities into ghost towns like New York, the President said he would move forward with re-opening.
In the short term, this would have stimulating effects on the economy. While people might continue shunning bigger-ticket items like airline travel, Americans have shown a willingness to return to restaurants, with dining reservations down just 40% from its peak, according to Opentable. That bodes well, of course, for restaurant stocks and other service-sector industries.
In the medium-term, however, this could have profound effects on infection rates and deaths.
Investing Takeaway #3: The Election Will Be Rocky
Continuing to stoke election concerns, Mr. Trump claimed “millions of ballots” would get dumped on the streets. While he said he would accept a loss, a Biden win would still likely trigger short-term instability by Mr. Trump’s most avid fans.
Surprisingly, Mr. Trump hasn’t spoken much about the vote-counting process itself. Vote-counting machine companies like Diebold (NYSE:DBD) have been broken into since 2005 in a process known as the “Hursti Hack” after the computer programmer who first discovered the security flaws.
Even more telling, there was little discussion about the role of social media giants, such as Facebook and Twitter, on elections. The Trump administration has been incredibly lax on regulating tech giants. Except for a $5 billion FTC fine in 2019, there’s been little appetite by the federal government to take them on.
Investing Takeaway #4: Healthcare on Hold
When Trump was asked for details on “repeal and replace,” he offered little in additional guidance beyond supporting a Supreme Court repeal of the Affordable Care Act (ACA).
At current enrollment trends, that means 23 million people would temporarily lose access to healthcare. The humanitarian crisis aside, this also bodes poorly for healthcare stocks and private insurance companies alike. The ACA has become a significant profit-maker for insurers, and a replacement would probably take years to create. The ACA took almost a year to become law, and a split Congress would have even greater trouble passing a new federal law if the courts rule against the ACA.
“Maybe I’ve changed the party a lot of the past several years,” Mr. Trump said, “we’d like to have health care.”
Investing Takeaway #5: Corporate Tax Breaks to Remain
While Mr. Trump touted the benefits of the corporate tax break, one thing was missing – there wasn’t any talk about lowering corporate taxes further.
There have long been talks about eliminating the corporate tax entirely. As surprising as it may seem, corporate taxes are a relatively inefficient way to tax profits, and it also only generates 6.6% of all federal revenue. Instead, a flat head tax combined with a progressive consumption tax could help offset costs without reducing corporate investment or the incentive to work.
Mr. Trump, however, has mostly avoided significant tax overhauls. The Tax Cuts and Jobs Act, the massive tax cut bill rammed through Congress, mostly consisted of lower tax brackets and changing certain tax deductions.
That means investors should expect current tax rates to hold under a second-term Trump presidency.
Investing Takeaway #6: Immigration Up in the Air
“We want DACA, we want DREAMERS,” Mr. Trump said when asked about immigration. “We want legal immigration. People have to come in with a merit system.”
I don’t put much weight into this – he seems to be shooting from the hip. The President has cut DACA programs and made H1-B visas for skilled workers far hard to earn.
But if Mr. Trump did create a merit-based system, that could change innovation in the U.S. in the long-term. Israel is an excellent example of immigration-led innovation. The country of just under 9 million people has become a startup hub, thanks to skilled immigration. Much of it was from Russia.
“Many were very smart people with technological background,” said Niron Hashai from the Jerusalem School of Business Administration at Hebrew University to the BBC. “Maybe they were not so much entrepreneurs, but when these guys meet Israeli-born guys, many interesting things happen.”
A fundamental shift in skilled-worker visas would change the way tech companies (particularly small ones) hire and operate.
Conclusion: Staying the Course
While Mr. Trump made some surprising promises about DACA and immigration laws, there’s reason to expect a major overhaul in a potential second term. Instead, it’s more likely that the incumbent president will double down on his efforts to repeal the Affordable Care Act, keep existing tax cuts, and reopen the U.S. economy with less regard to coronavirus fears.
Will he change course? Probably not. But Mr. Trump has surprised many times before. And he certainly will again before his time as President is up.
On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.
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