Presidential Debate: Trump's "Finale"?

Trump is still Trump, but Harris is no longer the same Harris. The Democratic Party adopted the strategy of "showing weakness to the enemy and deceiving the sky" in today's presidential debate, achieving a good effect: Harris, who has rarely been exposed in media interviews before, relied on stable performance, smart strategies, and the "contrast" with her opponent to excellently complete her debut in the presidential candidate debate.

It is worth noting that on September 16, Pennsylvania is about to start early voting, and Pennsylvania is undoubtedly the key to this year's election. The butterfly effect of the debate may soon begin to show, is Trump really going to "end"?

This was a debate where "form outweighed content". Overall, Harris effectively implemented the method of "criticizing Trump, becoming Trump, and surpassing Trump". Harris strongly seized the negative impacts of events during Trump's presidency such as tariffs, the pandemic, and the Capitol Hill riots; and in areas like tax cuts, attention to the middle class, and even some energy policies, she leaned towards Trump; then, using her logical and eloquent background in law, she successfully controlled the situation and led Trump to make inappropriate remarks (such as immigrants eating residents' pets).

In contrast, Trump's lack of logic and excess of emotions were magnified. According to the Polymarket website, after this 1.5-hour debate, Harris's probability of winning increased from 46.5% to 49%; Predictit website shows that Harris's probability of winning increased from 52% to 56%.

Is there really no way for Trump to turn the tables? There is still room. First of all, this debate undoubtedly helped Harris increase her support rate, but from the performance, content, and reactions from all parties after the debate, she may still attract the basic support of women, minorities, and young people, making it difficult to evaluate the impact on Trump's base of "old", "white", and "male".

Secondly, as we analyzed in the report "Presidential Debate: Three Questions Worth Knowing in Advance", Pennsylvania largely determines the final result. Pennsylvania chose Trump in the 2016 election, but chose Biden in 2020, and the current situation in Pennsylvania remains tense. According to the 2020 census data, the proportion of white people in Pennsylvania's population exceeds 70%, far above the national average In addition, there may be a second presidential debate in October.

The main topics of this debate focus on the economy, immigration, abortion, and other issues.

In terms of the economy, tax cuts are unavoidable. Harris described herself as a "middle-class child," reiterated her economic vision of tax cuts for the middle class, low-income families, and small businesses, and criticized Trump for tax cuts for billionaires and large companies. Trump, on the other hand, continues to advocate for tax cuts and tariffs.

Abortion rights sparked intense debate, with Trump reiterating that abortion rights should be left to the states, while Harris supported a national abortion rights stance by citing cases where women were unable to have abortions or had difficulty accessing abortion care, evoking empathy.

On immigration issues, Harris criticized Trump for undermining immigration laws and emphasized border enforcement; while Trump favored more aggressive deportation measures.

As the election enters a critical phase, what is the subsequent voting process like?

In terms of voting methods, there are still 3 types this year: Mail voting (also known as Absentee voting); Early voting, where states open early voting stations for voters to cast their votes in person; Election day in-person voting.

The proportion of voters who wait until election day to vote in person is declining, with 59.8% and 30.4% in the 2016 and 2020 elections respectively (impacted by the pandemic in 2020); in the 2022 midterm elections, the proportion of in-person voting on election day rose to 49.5%, with mail voting and early voting at 32% and 18% respectively. This means that about half of the voters will make their voting decisions before election day.

Regarding the voting schedule, as of now, North Carolina has opened its mail-in voting channel, and most states' mail-in channels will open from late September to early October. Starting in mid-September, states will gradually open early voting stations, with the key battleground state of Pennsylvania becoming the first state to open early voting on September 16.

In terms of voter turnout, it has been on the rise since 2000, with an increase in the enthusiasm of voters participating in politics. The Turnout Rate has increased from 51.7% in 1996 to 66.6% in 2020, reaching the highest level since 1904.

The performance of major asset classes is in stark contrast to the June debate, with a surge in "anti-Trump trades".

After the debate moved on to immigration-related topics, various asset classes experienced increased volatility: the US Dollar Index began to show significant declines, Nasdaq futures fell, US bond yields declined, and gold rose. This is almost completely opposite to the typical "Trump trades" during the June TV debate: "strong US dollar, strong US stocks, rising US bond yields", indicating a decrease in financial market confidence in Trump's re-election.

In addition, specific assets related to Trump such as Trump Media & Technology and cryptocurrencies also experienced significant declines during the same period.

The election situation remains uncertain, and the volatility of various assets is expected to increase further.

This year's election has been full of twists and turns, with alternating leads in the polling support for Harris and Trump, indicating that the uncertainty of the election results will lead to continued high volatility in assets.

Historically, the volatility of various assets begins to increase 2-3 months before Election Day.

Taking US stocks as an example, the VIX index generally starts to rise on the 57th trading day before the election, continuing until Election Day, and then gradually declines.

US bonds are more complex, with the MOVE index typically starting to rise on the 58th trading day before the election, until Election Day. However, in 2016 when Trump was elected, the MOVE index slowly declined thereafter, and the volatility of US bonds remained above the level on Election Day for nearly 60 trading days.

With the path of interest rate cuts and the election still undecided, the volatility of various assets may continue to increase, and trading strategies will need to wait for further clarity on macro variables.

Article Author: Shao Xiang S0600120120023, Wu Bin, Pei Mingnan, Article Source: Chuan Yue Global Macro, Original Title: "Election Debate: Trump's 'Curtain Call'?"