Miller Matt Capital Group

Capital Group: All eyes on the Senate

Capital Group: For investors, the results of the U.S. Senate elections will be the most important thing to keep an eye on if Joe Biden becomes U.S. president, says Matt Miller, Capital Group’s political economist.

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Matt Miller, Capital Group’s political economist

After all, the composition of the Senate will determine how quickly he can implement new regulations.

Matt Miller thinks Joe Biden has a greater chance of winning the presidency against President Trump. Up until the first debate, Miller believed predicting the outcome of this year’s election was akin to a toin coss, but President Trump’s behaviour during the debate, along with his COVID infection and ensuing events has swung things towards the Democrats.

Miller warns it may take several weeks after election day (3 November) before we know the result of the presidential election. Experts predict more than half the 160 million votes will be cast by mail, versus 30 million in 2016.

If there’s a marginal difference between the two candidates on 4 November, the day after the election, litigation may last for weeks, says Miller. “Postal voting is a huge logistical operation. What’s more, it’s a rigorous process with a lot of rules to follow. It’s conceivable that a percentage of the ballot papers could be declared invalid for purely technical reasons.”

He refers, too, to the small margin with which Trump won the elections in 2016: a difference of only 78,000 votes across several key states.

Under a ‘blue wave’ scenario where the Democrats win not just the White House but both houses of Congress – Miller believes Democrats will pursue policies to invest in Biden’s green investment plans, with likely implications to the federal budget deficit.

He also expects Democrats would pursue policies in three additional areas.

Firstly, taxes. Biden will likely want to raise corporate taxes in different phases, from 21-28%, which will have a likely impact on corporate profits.

A Biden Administration and Democratic Congress might also seek stricter rules to reduce share buybacks, which, according to the Democrats, are at the expense of workers’ wages and capital expenditures. A third priority is raising the minimum wage to USD 15 per hour, although this would likely occur in several stages.