Sinéad Carew
NEW YORK (Reuters) – Investors watching the first debate of the 2024 presidential race live on Thursday are hoping to hear U.S. President Joe Biden and his predecessor Donald Trump argue thoughtful positions on fiscal policy, tariffs and taxes. keeping a close eye on their mental acuity.
For a debate in CNN’s studios in Atlanta without an in-person audience, many on Wall Street are looking to aging candidates to prove they are savvy enough for four years in the White House.
Democrat Biden and Republican Trump are the oldest major party candidates in the White House, noted TS Lombard managing director Grace Phan, who wrote that if either candidate appears less than capable, they could “shake up the dead heat.”
“The nightmare scenario for investors would be if neither candidate ends up in the position,” said Robert Phipps, a director at Per Stirling in Austin, Texas.
His concern is whether Biden, 81, will seem too old or “sluggish,” or if Trump, 78, will have “too many pointless tirades.”
According to Phipps, markets tend to be politically indifferent, but the greatest fear is caused by change that introduces uncertainty.
Jack Ablin, chief investment officer of Cresset Capital in Chicago, wants to see “rational internal debate.”
“I’m not looking for drama,” Ablin said. “In many ways, this debate epitomizes the election process in this country… If it’s just chaos and somebody walks off the stage and it just can’t be done, it sends a terrible message to the American people and to the world.”
Wall Street is especially eager to hear how Biden and Trump plan to address a range of challenges, including growing budget deficits, high interest rates and slowing but still high inflation, as well as signs of a slowing economy along with rocky trade relations with countries like China.
Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, said investors respond best to thoughtful plans to address these challenges.
“In general, markets are looking for each candidate to be reasonable, not extreme,” Christopher said. “If the debate turned into personal animosity, it would be a bad sign for compromise and cooperation. Being able to govern a country is part of demonstrating a willingness to compromise with the other side.”
Both Biden and Trump have pushed for a tough trade stance, imposing and threatening tariffs, particularly on China. But investors are leery of the tariffs’ impact on inflation.
“We expect the market to react positively if either candidate tempers their enthusiasm for tariffs and trade restrictions,” Christopher said.
On fiscal policy, Cresset’s Ablin notes that interest payments on US borrowings are catching up with defense spending, with $866 billion spent on defense in the 12 months to May versus $836 billion in interest payments.
He wants “one of the candidates to demonstrate some leadership on issues of fiscal responsibility and recognition that our current fiscal trajectory is unsustainable.”
The first debate, more than five months before the election, may not have an impact on financial markets, said Carl Ludvigson, managing director of Bel Air Investment Advisors. In the best-case scenario, he said, the dominant candidate could begin to change the odds of a Republican or Democratic victory.
“In the first round or two of a fight, no one is going to get knocked out yet. They’re just trying to get a feel for the other boxer,” said JJ Kinahan, CEO of brokerage IG North America.
“The market will be a very interested observer, making sure that neither of them loses in the first round. I don’t think you will win the election in this debate, but you may lose it. You can do more bad than good.”