UK Edition
Chief executives and investors are being warned to prepare for instability around the US election, with a rerun of Donald Trump versus Joe Biden threatening to bring an unusually high level of uncertainty.
Tina Fordham, who was the chief global political analyst at Wall Street giant Citigroup before launching her own consultancy, said the “prospect of an uncontested result is lower than for any of the five American elections I’ve covered professionally”.
Ms Fordham, who is also an adviser to the Ministry of Defence (MoD), said: “We are advising clients not to expect a clear result. The US electorate is more polarised than ever, with record low trust across all institutions, and AI deepfakes and other forms of election interference are likely to play a role that we’ve never seen before.”
She warned that “disputes, re-counts and even a Supreme Court referral are highly plausible”. All are likely to have a chilling effect on economic activity by throwing the future direction of policy into doubt.
City economists have also warned that the US election risks blowing their forecasts off course.
Paul Danis, head of asset allocation at one of Britain’s largest wealth managers, RBC Brewin Dolphin, said Mr Trump’s return and sticky inflation were the two greatest threats to the investment outlook.
Mr Danis said: “The political backdrop is a risk. Looking at the election models, Trump has a very small lead. He has threatened to slap 60pc tariffs on China, and 10pc tariffs on all other countries. That would certainly mark an escalation from his first term.”
While stock markets rose during Mr Trump’s first term in the White House, Mr Danis said the backdrop now was very different amid growing concern over the US deficit.
It follows warnings last week from the Congressional Budget Office head that the US will face a mini-Budget-esque bond market meltdown if the government keeps ignoring the ballooning debt pile.
Analysts at Goldman Sachs also warned clients that a victory for Mr Trump in November would be bad for European stock markets.
Europe-listed equities have risen 12pc over the past six months but this rally could be scuppered by “rising geopolitical risks”.
In a note to clients, they warned: “Europe equities are sensitive to international trade, geopolitics and economic policy uncertainty. The prospect of tariffs on exports to the US (a Trump proposal) and any reduction in funding for Ukraine (gaining support among Republicans) would both be significant negatives for European stocks.”
Given the risks around the election, Ms Fordham said she is telling her clients not to put off business until after the election.
She said: “Expecting the fog to lift and clarity to descend from Washington on November 6th, the day after US elections, is wishful thinking. 2024 US elections aren’t going to follow the old playbook.”
Ms Fordham, who set up Fordham Global Foresight in 2022, said chief executives “waiting for the storm to pass could be caught out”.