European traders will be arriving to their desks today to the breaking news that President Donald Trump and First Lady Melania Trump have tested positive for the COVID19 virus. This now raises several questions and adds further uncertainty to the upcoming United States elections.
What Happens with the US Elections?
The US elections are just weeks away and as highlighted in a previous article, the markets already have concerns about a contested election and prolonged political uncertainty. In light of the positive test, Trump’s schedule has been cancelled for the next two weeks. This includes campaigns and rallies in key swing states. As a result, the immediate reaction in betting exchanges has been to increase the odds of a Biden win and a Democratic blue sweep.
As it stands, the elections remain set to go ahead on 3rd November 2020. However, this very much hinges on President Trump recovering in the next two weeks. Trump’s team have mentioned that so far, the President is not exhibiting any symptoms. If he remains asymptotic or experiences only mild symptoms, then there is a good chance that he will recover in around two weeks.
On the other hand, if the President begins to develop symptoms, then fears will elevate about his health. Trump is 74 years old and is therefore at higher risk of developing severe symptoms. If the coronavirus was to leave the President incapacitated, or in the worst-case scenario, if the President were to die from the infection, then US elections would be very likely pushed back.
What About Joe Biden?
President Trump and Democratic nominee, Joe Biden, shared the stage together during this week’s debate. Although they did not shake hands or seemingly come into close contact with one another, they were together for a long period of time.
If Joe Biden were to also test positive for the coronavirus, then some of the same questions would be raised about the elections. If either Trump or Biden were to develop severe symptoms in that scenario, it once again brings up the question about whether either candidate is fit enough to be running for Presidency.
Apart from Trump and Biden, many of their team members may have come into contact with one another, so this is also another way that Biden could be at risk of contracting the virus.
How Could This Change the Policy Response?
Heading into the elections, Joe Biden has fiercely criticised Trump’s handling of the coronavirus pandemic. It has to be said that Trump has been much more ‘relaxed’ about the coronavirus situation compared to other global leaders and has been more interested in reopening the economy. The policy response from the Trump administration has left the United States as one of the worst affected countries from COVID19, but could this latest development force him to take the virus more seriously?
Earlier this year, UK Prime Minister Boris Johnson also tested positive for the coronavirus and experienced some severe symptoms. In the aftermath of that, although the UKs policy response has been heavily criticised, I would argue that the UK government has been slower in lifting restrictions, and more inclined to reimpose restrictions compared to what we might have seen if Johnson had not contracted COVID19. If we see a similar reaction from President Trump, it could mean restriction measures remain in place longer, and he may be a lot quicker to act in imposing new restrictions.
The fact that the President Trump has caught COVID19 even though he has generally tried to play down the virus could mean that Americans now take this infection more seriously. This could impact consumer and business confidence in the coming weeks and further slow the economic recovery. However, it may also be the case that Trump recovers fairly quickly from the virus, which would embolden his supporters and those who argue that life should simply go back to ‘normal’ as it was at the start of the year.
What Happens Now?
This morning, the markets are very much in a risk off mood, on the back of the news. The next steps will be to find out whether Trump is experiencing any symptoms or not. If he is not experiencing symptoms then the recovery should be fairly quick, in which case the markets would likely fade the reaction we have seen.
If Trump develops severe symptoms and is unable to work, then Vice President Pence would take over temporarily. However, if Pence were to also contract the virus, then the waters get a little muddy and we would need to watch developments closely to see who would take over. In this scenario, the elections are also likely to be pushed back, and Trump could be forced to withdraw from running for re-election.
As mentioned at the start, this news story raises a lot of question, but we will not get all the answers anytime soon. In these market conditions, it is critical to manage your risk properly and to react in a timely manner to fresh developments.