President-elect Biden s win good ’ news for emerging market assets
Under new presidency, international market volatility should ease
With US President Donald Trump set to make way for president-elect Joe Biden early in 2021, BlackRock predicts that Biden s win will see emerging
’ market assets blooming as a result of improved trade sentiment.
US-based BlackRock is the global leader in investment and technology solutions, with over $6-trillion (R94-trillion) in assets under management.
However two issues could blur international markets silver
’ linings; Trump may yet (at the time of writing) prove that there was election fraud and vote-rigging, and Covid-19 may be regrouping for a massive second wave.
Paul Marais, MD of NFB Asset Management, part of East London-based NVest Financial Holdings Group of Companies, said the company had never believed in forecasting because nobody is smarter than the “markets ”.
This is even more pertinent given the negative possibilities that might still emerge for SA investors and companies.
However, had Trump won, said Marais, it was likely that his second term would result in a continuation of US businessfriendly policies, with a focus on American jobs for Americans ”, “and the rest of the globe can look after itself, especially Africa.
Another benefit to SA investors “is that Trump was doing a very effective job, for Americans that is, of slow-strangling globalisation, which was a stated policy in his administration.
Under Biden international market volatility should ease, and emerging market assets might have resurgence. From a local investor s perspective, “’ one of the main issues in 2021, and probably for the full Biden term, is the African Growth and Opportunity Act [Agoa]. It is the backbone of SA s
’ trade partnership with the US.”
Due to expire in 2025, Biden s
’ administration was unlikely, said Marais, to scrap the agreement, or radically change Agoa terms. Biden s presidency, believes
’ Marais, would not be as business friendly (to US commerce) as Trump s. It might, in
’ fact, repeal Trump s tax cuts,
’ resulting in tax increases for 80% of the US working population. However, said Marais, Biden has promised a $2-trillion (R31.36-trillion) stimulus package which is translating into optimism in the market.
A Biden administration would be looking to offset lockdown losses with an expanded US balance sheet.
Marias said if a larger US stimulus bill goes through, US debt-to-GDP dynamics will deteriorate at a faster rate, potentially enough for US yields to rise. This could be enough to make the dollar attractive in terms of the world s reserve
’ currency, which could now also offer attractive yields.
Companies that had heeded Trump s call to bring US firms
’ ’ offshore manufacturing capacity back to America might be regretting the decision.
The companies, including Apple Inc, had pushed Trump s
’ administration to agree to tax breaks in exchange for pulling manufacturing out of China and the East into America.
Under Biden the tax breaks might not happen and companies returning will have to cope with larger wage bills.
On Tuesday, President Cyril Ramaphosa had virtual discussions with US representatives from Business Council for International Understanding, Corporate Council on Africa and US Chamber of Commerce. It was a prelude to the SA Investment Conference, scheduled for November 17 and 18.
According to the US Embassy, over 600 US-linked companies operated in SA. He said that under Biden, investors would no longer fear the yo-yo market volatility that was driven by Trump s Twitter trade wars ”.
’ “
For international wellbeing “and safety, it has been reported that Trump will not have access to the nuclear war button as from January.
While nobody is smarter “than the markets, it s highly
’ predictable that smart people around the globe will breathe a sigh of relief when it happens.”