Analysis of the Potential Impact of the US elections on Global Markets and Luxembourg
As we continue to closely monitor the U.S. Presidential race, several key points emerge regarding the potential implications of a Vice President Kamala Harris victory and its subsequent impact on global markets, with a brief focus on Luxembourg.
1. Biden’s Exit from the Race: The withdrawal of President Biden from the presidential race is a typical political maneuver. When one candidate is perceived as less compelling compared to their opponent, it is common for them to step aside.
2. Party Dynamics: The Democratic Party is driven by a collective ideology, whereas the Republican Party currently appears to be centred around a singular figure.
3. Strategic Approaches: The Democratic Party has exhibited a clear, albeit debatable, strategy. In contrast, the Republican strategy has heavily relied on personal attacks and the prominence of Mr. Trump.
4. Election Outcome Uncertainty: While the exact probability remains uncertain, the overall impact on the global stage is expected to be minimal.
5. Impact on Luxembourg:
– Military Spending Pressure: In the event of a Trump victory, Luxembourg might face increased pressure to boost its military spending to 2% of GDP. Currently, Luxembourg spends 0.83% of its GDP on defense. If this spending increases to 2%, it would result in an additional expenditure of approximately 1 billion USD per year, escalating the budget deficit from €1.9 billion to €2.8 billion;
– Economic Implications: Increased military spending could have positive economic effects for Luxembourg. The steel industry, vital for military equipment production, stands to benefit. Additionally, holding companies could see increased profits, leading to higher tax revenues and personal spending within the country.
6. Global Economic and Market Impact:
– Healthcare Sector: A Harris administration is likely to push for significant changes in the healthcare sector, potentially increasing regulation and expanding public healthcare initiatives. This could impact global healthcare companies and investors in this sector;
– Environmental Policies: Strong environmental policies could lead to increased investments in green technologies and renewable energy, impacting global markets positively, particularly in Europe where there is a strong push for sustainability.
– Trade and Tariffs: A shift in trade policies might occur, potentially easing tensions with key trading partners, impacting global trade dynamics and market stability.
7. Trump’s Re-election Odds: We continue to assess the likelihood of Mr. Trump returning to office as well below 50%.
In conclusion, our previous analysis remains valid. Should Mr. Trump be re-elected, we anticipate that most of his policies would either benefit or not significantly affect our investment strategy. However, a Democratic administration under Harris would require a reevaluation of strategies, particularly in sectors such as healthcare and environmental services, which could experience substantial regulatory and market shifts.
