17 Nov 2023
The best President, or the least worst? Exactly a year before the 2024 US election, the Jupiter Merlin team analyses a likely Biden/Trump rematch.
“Remember, remember the Fifth of November, gunpowder, treason and plot; for there is a reason why gunpowder and treason should ne’er be forgot”, goes the old nursery rhyme about the plot by Guy Fawkes and his co-conspirators to blow up Parliament and the king, James I, in 1605.
Not as literally but potentially as politically explosive, November 5th, 2024, will be the date America goes to the polls to elect its next President. We are almost exactly a year away from that; but the primaries to select the presidential candidates and their running mates begin in only two months. Iowa is scheduled to be first out of the traps with its electoral caucus on 15 January. Dominating the runners and riders is one significant personality: Donald Trump.
‘Unprecedented’ is hyperbolically, liberally and inaccurately applied these days. While this election will be extraordinary, it is certainly not unprecedented as many commentators would have us believe. According to the New York Times, it is true that Donald Trump is the first ever US president to be indicted on criminal charges; however, there seems to be no shortage of presidential candidates in US electoral history who had already been charged or convicted of crimes before standing for office entirely legally and within the Constitution. As recently as 2016, Rick Perry, a Republican candidate, stood against Trump in the primaries having been indicted in a corruption case.
However, on few occasions has the electorate trooped dutifully into the polling booths with such misgivings for both the incumbent president and the most likely challenger. It can be summed up in the most recent ‘approval rating’ polling data which has been remarkably stable for some months: 53.2% of all Americans polled disapprove of Joe Biden, only 41.9% have a favourable view of him; 54.6% of the same sample disapprove of Donald Trump and only 40.7% approve of him. The implication is that most Americans therefore do not much want either again as their president.
The Republican conundrum: damned if they do, damned if they don’t
Important not to lose sight of is how in less than a decade and a half, the traditional US electoral caucus has turned itself upside down. 2009 saw the birth of the Tea Party, the populist conservative element which splintered within the Republican Party. Viewing the GOP (the Grand Old Party) as too paternalistic, too quick to endorse government intervention in the private sector and no longer the champion of low taxes, the global financial crisis was the straw that broke the camel’s back for many who saw the GOP complacently sliding towards the left of centre and becoming indistinguishable from the Democrats. Rapidly becoming more nationalist as well as populist as the Tea Party developed, it became attractive to many among the disaffected blue-collar, typically white working-class cohort who would traditionally have been rock solid Democrats. It was Trump and his brand of “AMERICA FIRST!” who brought this rough-and-ready constituency back into the Republican fold. Traditional Republicans of the more patrician persuasion, perturbed at the social change in American Republicanism and unwilling to be associated with it, began to switch allegiance in droves to the Democrats. The problem for the GOP is that the working class vote in the Republican Party has a much stronger personal loyalty to Trump the man, than it does to the party he seeks to represent; in the absence of Trump, would those erstwhile Republican-now-Democrat voters return to the GOP fold, or has too much water passed under the bridge?
The emergence of Trump as a contender ahead of the 2016 election was divisive enough. The division today is even greater given the antics of his term, how it ended and the pending criminal proceedings against him. It is a statement of the obvious about Trump: people either love him or loathe him; neutral is not an option. Despite four criminal indictments (two of which are federal), ranging from corruption and vote-rigging to inciting sedition, in four different states (New York, Florida, Washington D.C., and Georgia) so far encompassing 92 separate felonies, he is nevertheless easily the dominant Republican contender for the Presidential nomination. It is not so far from the truth that for every additional indictment, up went his poll rating! The leading US pollster, Five Thirty Eight, currently has 57.1% of Republican voters backing Trump; his nearest rival, Ron De Santis trails at 13.9% and the remainder in single digits. Three of the criminal trials are already scheduled, beginning on March 4th in Washington with the federal indictment for trying to overturn the 2020 election result. While the Georgia trial (state vote-rigging) has no start-date, the other two will also take place during the primaries with no clear guide as to the duration of each (but some will overlap; he’ll need his Tardis to be in multiple docks at the same time). These are all on top of the current civil case in New York against Trump’s son, Donald Jr, in which his father has already appeared, as to whether he knowingly signed off on fraudulently inflating the value of the corporation’s assets.
/br> Legally, under the Constitution, there is no impediment to being President even if a convicted felon. There are only three conditions to be satisfied for the Presidency: that he/she is a natural born citizen of the United States; is over the age of 35; and has been resident in the US for a minimum of 14 years. Nowhere is there any condition that the candidate must be of good character or committed to upholding standards and responsibilities in public life. That is for the electorate to judge.
Politically, therein lies the rub: less a case of can Trump be president, than do Americans and even the Republicans really want him in the White House again? Trawling through the interweb, one can find any number of polls which tell the inquirer what they want to hear about his chances. The key political problem for senior Republicans, seeking not only a Republican presidency but also control of the House and the Senate (where one third of the seats will be contested) is simply this: they cannot afford to deny Trump the ticket, risking losing the millions of votes directly attributable to him and killing their electoral chances stone dead in the process; but in the absence of any credible alternatives, what is the Plan B? They may just have to grit their teeth and see what happens whether he is the winner or not.
What does not help the Republicans’ appeal is that internally, they give all the signals of being in chaos. And it’s not just about Trump. In the House, since their success regaining a wafer-thin majority in the mid-terms last November, their history of electing and keeping a Speaker has been an embarrassing joke. When they are having such demonstrable difficulties managing their own party’s domestic affairs, somehow, in very short order with the clock formally ticking from mid-January, they must convince the electorate that they are a party fit to govern.
The Democrats and Biden: to dump or not to dump?
Biden’s record in office has been distinguished by fiscal incompetence in allowing the federal government to be put in financial special measures twice in the same year (either not being able to honour your debts or pay for public services is a position no responsible government should ever find itself in, let alone the biggest economy on the planet and the owner of the world’s principal reserve currency; for this alone, the Democrats should be deemed unfit for a second term); his misguided and poor foreign policy decisions have had demonstrably bad outcomes. On the other hand, his Inflation Reduction Act showed a political deftness of such proportions that it took some time for many to appreciate just what a profound effect it would have, particularly on world trade.
But for Biden, it is not just about his competence as President. Being President of the United States is one of the most difficult and punishing jobs on earth. Bluntly, is someone who by the election will be 82 years old, and 86 when he leaves office, fit to do the job. According to a recent CNN poll, 67% of Democrats say Biden should not run for a second term; 47% cite his age as the specific reason. Biden is publicly committed. However, he does face opposition. A week ago, Dean Phillips, a Minnesota member of the House of Representatives, formally announced that he is standing against Biden. He has virtually no chance of success given that convention says a sitting president aspiring for a second term does not participate in primary debates; none is scheduled so he will get no Democrat sponsored airtime. On the other hand, there are enough senior Democrats, particularly on the left wing of the party who have been vocal that Biden should stand down in January 2025, and are queuing up to take his place. Hardly a vote of confidence, what they are in effect questioning is: is Biden an electoral asset or a liability?
Increasing polarisation and nastiness in a two-party system
Whoever ends up on their respective party tickets, the great American public will decide who occupies the White House. And if history is a guide, roughly half will vote Democrat and roughly half Republican: the right side of roughly and you’re in, the wrong side and you’re out. But what is becoming more evident is the increasing polarity in US politics, even in a two-party system: the extent to which the right wing of the Republican Party is moving further right and more nationalist, and the same is true in the opposite direction on the left wing of the Democrat Party as an increasing number embrace the type of hard-left socialism that is historically very unusual in America but entirely familiar in European politics. And at the poles, militancy and direct action are increasingly to the fore (in 2021, the storming of the Capitol was obvious, but go back to 2016 and there were significant demonstrations by the hard left across the country, some of which turned violent, under banners of “Dump Trump!” and “Trump is not my President!”, refusing to acknowledge Trump’s democratic win).
/br> For an outsider, what will unfold will be morbidly fascinating to watch. It will be dirty and vicious, full of smears and accusations of fake news and conspiracy theory. Will the Russian, Chinese, North Korean and Iranian dirty tricks asymmetric warfare wings cheerfully stir the pot and take an active and disruptive role; or will they sit back happy to let the Americans tear lumps out of each other with no help needed? Whoever is the winner, the process of getting there is unlikely to reflect well on the United States as the leader of the free world.
“The world is still turning. It’s just got a little crazier”.
So said German finance minister Wolfgang Schauble memorably in 2016 when Trump defeated Hilary Clinton. Whoever wins the White House, an extra degree of craziness in the United States is precisely what the world does not need today. As that strong-man anti-western dictatorial axis coalesces and its members jointly and severally seek to sow instability in the West to leverage their own geopolitical advantage, firm leadership from the US is more important than ever.
Moscow, Beijing, Tehran and Pyongyang, and others, will all be recording the changes recently as the direct conflict in the Middle East between Israel and Hamas dominates the western media and political agenda. They will have noted the much wider rippling effect, causing political divisions both between and within western capitals and most notably in the UN. In the past month, Ukraine has been almost entirely absent from the news coverage in the West. For Zelensky and his worst fears, there is growing boredom in the Western camp with the Ukrainian conflict, as admitted in the unfortunate entrapment interview given this week to two Russian pranksters (and believed to have links with the FSB) by Italy’s Georgia Meloni. In the US, the Republicans are refusing to increase funding to Zelensky beyond current expenditure; on the far-right wing of the party where commentators and agitators such as former Trump strategy guru Steve Bannon are vocal and active, the strong narrative is that the US has no business now or in future “being involved in foreign wars”. To those who would do the West harm, the smoke signals are obvious.
Adding to the uncertainty in Western solidarity, and highly unusually, the next UK general election and the US Presidential election are virtually simultaneous events. So far, among the western alliance and particularly in NATO, the UK and the US have been in virtual lockstep, particularly when confronting Putin. Will that joint gravitational pull at the centre of NATO be dissipated in 14 months’ time?
The investment perspective
These are significant imponderables for the future balance of geopolitical influence. From an investment perspective, as we have discussed on many occasions, the changing macro and geopolitical political backdrop is reflected through the barometers of long-term risk premia and exchange rates.
Specifically regarding the US and UK elections, these are binary events; on the Jupiter Merlin team we take the simple view that to prejudge the outcome is the equivalent of betting on black or red at the tables and keeping everything crossed that the punt works. That is something we do not do. While there may be volatility in the immediate aftermath of the results, we prefer to see the lie of the land after and adjust accordingly. But the analysis and preparation ahead of such events is still invaluable, particularly if quick action is needed.
The Jupiter Merlin Portfolios are long-term investments; they are certainly not immune from market volatility, but they are expected to be less volatile over time, commensurate with the risk tolerance of each. With liquidity uppermost in our mind, we seek to invest in funds run by experienced managers with a blend of styles but who share our core philosophy of trying to capture good performance in buoyant markets while minimising as far as possible the risk of losses in more challenging conditions.
The value of active minds – independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Fund specific risks
The NURS Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. The Jupiter Merlin Conservative Portfolio can invest more than 35% of its value in securities issued or guaranteed by an EEA state. The Jupiter Merlin Income, Jupiter Merlin Balanced and Jupiter Merlin Conservative Portfolios’ expenses are charged to capital, which can reduce the potential for capital growth.
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