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22 Sep 2020 – Insights

Forget Trump and Biden – this is the key person in the US

COLUMN: Danske Bank’s investment strategist, Lars Skovgaard Andersen, explains why the US presidential election will probably not have any great impact on investments.

US voters are set to elect their president for the next four years in November and the campaigns are entering their final phase. In his first term, Donald Trump has torn up the rule book for US presidential behaviour. His countless diatribes against allies and trading partners are unparalleled, while the impact they have had on the global economy and hence the financial markets is uncertain.


The goal of the central bank is to ensure stable economic growth, and at a time of great political noise ahead of the US presidential election, monetary policy and the rhetoric of the Fed are, in my view, far more important for your investments than whether the next president of the USA is an elephant or a donkey.

Lars Skovgaard Andersen

Investment strategist, Danske Bank



From a broader perspective, however, both the economy and equity markets have performed well during Donald Trump’s first term – at least until the corona crisis struck. We should note that, historically speaking, whoever takes up residence at the White House, they generally do not have any great significance for investors. Presidents take over economies, and they really have to mess up to cause such massive damage that they destroy economic growth.

Even the trade war did not spoil the party
Donald Trump took over a robust economy and via tax cuts gave US corporations additional financial ammunition to increase digitalisation and automation, etc., and also to lift their equity prices through increased share buybacks. At the same time, the strength of the US economy allowed him to pursue several of his political agendas, for example in relation to US-China trade and China challenging US leadership in the tech race.

However, while Donald Trump’s trade war with China has at times caused great uncertainty and share prices to tumble, global equities have nevertheless generated reasonable returns – which brings me to the headline of this article. I would suggest that from an investor’s perspective, the key person in the US does not sit in the White House, but at the Fed, the US central bank, where the current Chair of the Board of Governors is Jerome Powell.




Jerome Powell, Chair of the Board of Governors at the US central bank

A key person for investors
Central banks run monetary policy, and the Fed chair can usually influence the financial markets and keep the US economy on track to an even greater extent than the US president. The Fed is responsible for steering the economy through troubled waters, regardless of whether the turbulence stems from virus outbreaks, the economic cycle or if a US president occasionally pursues a political agenda that damages the US economy.

The negative fallout from Donald Trump’s trade war was thus one of the reasons why the Fed again turned dovish and got the US economy back on track – so the Fed in fact shares the honour for the growth experienced by the financial markets under Donald Trump.

Likewise, the Fed helped calm financial markets when the corona crisis erupted in February and March this year – by announcing massive bond buybacks and significant interest rate cuts, the Fed helped turn things around.

Powell holds all the aces
You really can’t overestimate the significance of the Fed as a backstop and shock absorber for the economy, even though the central bank can of course also make wrong decisions and create uncertainty – for example, by tightening monetary policy too far or too fast. Nevertheless: Donald Trump or Joe Biden – presidents come and go, and their policies can dent the economy and cause turmoil in the financial markets, but ultimately it is the Fed that holds all the aces.

And while Donald Trump would very much like to influence Jerome Powell, the Fed is independent. The goal of the central bank is to ensure stable economic growth, and at a time of great political noise ahead of the US presidential election, monetary policy and the rhetoric of the Fed are, in my view, far more important for your investments than whether the next president of the USA is an elephant or a donkey.

This content is not investment advice - you should always speak to an advisor about how a possible investment matches your investment profile before making an investment.