With the 2020 Presidential Elections looming, should investors actually want Trump to be re-elected?
When it comes to Donald Trump, one thing I’m sure we can all agree on is that he certainly knows how to get a reaction out of people. Whilst I will keep my personal feelings regarding the 45th President of the United States to myself – it must be said that I am not his greatest fan. I state that because I want you to understand the context of this article.
However, despite my statement above, as an Investment Manager, it is not always the morally desirable outcome which provides the best returns for the market. In this instance, despite his erratic behaviour, it is possible that the world’s investors are best served by Donald Trump winning a second term. This is, regrettably, not so much because he is, per se, good for the market, but more because the swing to the right in the Republican party has had the effect of driving the Democratic party further to the left, meaning that there is every possibility that we could be faced with a choice of Donald Trump or the left leaning Elizabeth Warren.
Again, I should declare my hand that I have the greatest of respect for the intellect and integrity of Elizabeth Warren and believe that she makes many valid points, but regrettably the polarisation of US politics has resulted in some previously unthinkable policies not only being discussed but expanded upon. The US has more than its fair share of billionaires and many of these are exceptionally altruistic. Amongst those, I would include Bill Gates who has not only founded, but also funded, the Bill and Melinda Gates Foundation, giving away over $45 billion dating back to 1994. As such I number him on the side of the angels so when I read that even he is starting to baulk at proposals of Elizabeth Warren, it may be time to start listening.
Earlier this year a group of America’s richest people penned an open letter calling on presidential candidates to roll out a wealth tax on the super-rich, so it is not that there is not support for the concept, it is the execution, and when Elizabeth Warren starts talking about 6% per annum wealth taxes, the only winners will be the accountants. It has been proven on many occasions that excessive taxation of the highest earners generally reduces the tax take as they utilise schemes to relocate earnings and reduce liabilities. In the case of the wealth tax, there would be incentives to reduce taxable wealth which will have the knock on effect of reducing the ability of that wealth to grow the economy. To put it simply, we would be better working out how to grow the cake rather than arguing how best to slice the existing cake up.
Morally, most people believe as per the 2016 popular vote and most polls since, that the next President of the United States should be anyone but Donald. However, people tend to talk morally and vote economically, so we can only hope that the Democratic party comes in from the far left to find a more generally acceptable middle ground, which the majority of Americans can support.
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