What happens to the Australian dollar if Trump dies?

See the latest Australian dollar analysis here:

Macro Morning

DXY was stable Friday night:

The Australian dollar was weak:

Gold eased:

Oil crashed:

Base metals were mixed:

Miners did OK:

EMs fell:

Junk did OK:

The yield curve steepened as the “blue wave” becomes a reality:

Stocks fell sharply, especially growth:

In news, US jobs were pretty weak relative to expectations. The bigger news was, obviously, Donald Trump’s COVID-19 illness and commitment to a hospital (which happened after the close). An event now flooded with propaganda. Whatever the precise truth of his condition, it’s fair to say that he would have had to be pretty sick to agree to go. Given what a poor look it is for the virus skeptical president.

With that out of the way, let’s explore the implications of Donald Trump’s illness for markets and the Australian dollar.

Trump dies 

  • There’ll be a sympathy vote for Republicans and a rush to the flag but not much. The ironies are just too thick. I doubt this would extend beyond the Trump base very far into conservative swing voters.
  • More likely, it would underline what an abject failure Trump has been as the virus President, and how the US needs a rationale leader not a partisan suicide bomber:
  • Aside from anything else, Trump has hijacked the Republican brand so completely that if he were not there then the base voter turnout will be hit and may well crater.
  • That said, no Trump would probably result in some falls to the Democratic turnout as well.

Trump is sick or incapacitated

  • Pence takes over the office as Trump gives it up voluntarily or involuntarily by act of Cabinet or Congress.
  • If Trump is too sick to run for office then Republicans must nominate a new candidate but at the campaign level there are lots of uncertainties over how to handle out-of-date campaign materials and the like. There would also be many postal votes that have already cast for the wrong candidate. This could create conflict over election delays and call into question outcomes. Various experts say an election delay is very unlikely but state-level conflict is equally likely.
  • Any scenario in which Trump’s campaigning is impacted by COVID is obviously a negative for him in all of the most obviously ironic ways.

Trump is too sick to run but then gets better

  • Once the transfer of power and election transpires, Trump is gone.
  • A close loss for the new Republican candidate might lead to post-election challenges to the outcome. But without a madman at the helm that seems less likely.

Trump gets better swiftly

  • Some may argue that this would be a plus for his COVID skepticism but only for the converted so it’s not much of a positive. Aside from anything else, the lingering questions over the virus sweeping the White House, and whether Trump was reckless after becoming ill, will do him harm.

Election debates

  • Trump is too sick to attend. Bad for him.
  • Trump is too sick to attend and goes anyway. Bad for him.
  • Trump recovers quickly and attends is a mild positive for him. But he’ll have to hurry. The next debate is Oct 15 then 22. If he misses the first owing to COVID then it’s bad for him. He can’t debate COVID from a hospital bed. That would be fatal.
  • Much more attention will now shift to Oct 7 debate between deputies Harris and Pence.

Stimulus

  • After Trump’s illness, Senate majority leader, Mitch McConnell, suspended all voting on bills for two weeks, except for debate surrounding SCOTUS. Three GOP senators are already infected. The fiscal stimulus package is now officially stalled and most likely dead.
  • Republicans have little incentive to press ahead with it if they have concluded that Trump is a dead duck. The package will not arrive until after January anyway so why give an incoming Biden Administration a lift? Yes, they think in this way.
  • Democrats don’t want to pass it, either. They can blame Republicans for its failure and campaign on a bigger package.

In short, not much good can come of this for El Trumpo and the Republicans. Betting markets are now suspended worldwide but not before this:

What about the Australian dollar?

  • For stocks, it’s “risk off” as markets must digest fiscal stimulus delays and a rising probability of an even more fraught and contestable election that ends up in conflict and courts. The election now brings an increasingly likely “blue wave” that wins democrats all three arms of government and tax hikes for corporates plus capital gains, as well as minimum wage hikes (a triple whammy for stocks). As well, Biden is more likely to put lives ahead of economics in his virus response. There are some tailwinds once in power with more generous fiscal, less combative international relations (though still China hostile), less domestic strife as BLM meets policymaking and, eventually, stronger domestic demand as inequality is addressed. So, I would buy a goodly Biden drawdown, especially given the, albeit troubled, vaccine wave of 2021.
  • Forex will follow stocks so this is bullish DXY and bearish AUD while it lasts.
  • Expect a strong bid for safe-haven yield. At a certain point, a blue sweep will trigger a bond panic on increased fiscal but short term election chaos should outweigh that. Even when if it comes, I would not expect any bond back-up to last unless Biden embraces the policies of Bernie Sanders and he is not there yet. Gold will probably correct one more leg lower before the bull market resumes.

Finally, these things are moving fast so all forecasts at this juncture come with a large asterisk!

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. boomengineeringMEMBER

    Either way heading for hyperinflation unless a miracle can stem the flood of fiat.

    • boomengineeringMEMBER

      Forgot to add, deflation preceding inflation but the more stimulus and money printing the less time with deflation.

      • If you want to talk about inflation then try booking a holiday house on Victoria Surf Coast this holiday period. 7 grand a week for something that was 3grand a few months back

        • You must be mistaken, Col. The CPI and bond yields quite clearly point to deflation. The cost of domestic holidays and your grocery bills will be slashed in no time at all. 😉

          No. Really.

        • Stewie GriffinMEMBER

          All those rich bankers and doctors unable to holiday overseas are now massively overpaying for holidays away in Aus. I heard tales of a Surgeon who paid $20k for a luxury chateau at the snow in Thredbo, but was unable to secure life tickets to the Thredbo given their first in first served policy and otherwise limited availability. Apparently in disgust he didn’t even end up going – no refund either.

    • The operations of central banks globally since the GFC has been to pour money into the banks and hope for trickle down. This has led to massive asset price inflation, particularly in assets like stock markets, utilities, housing, and even art.

      All of the cash had to be kept in check with ultra low interest rates – and this was managed with a massive global war on wage rises – stagnant wage rises meant low inflation.

      Now however they must pump into the pockets of consumers to get things going. Which still might be ok as they will be creating jobs to soak up massive unemployment – so still no impact on wages.

      HOWEVER – we are now completely out done by Asia – we are so far behind them its not funny – while Asia was used to dealing with bird flu, sars and did VERY well with Covid – the west has completely fallen over – we are in real strife.

      So the catch up to competing Asian economies is going to require vast stimulus and that is absolutely going to be inflationary in a huge way.

      When that is coupled with collapsed supply chains – we are in so much trouble.

      • Ailart SuaMEMBER

        I tend to agree. And another factor in the mix, is, if you were to measure CPI as it was measured prior to 1980; inflation today would be hovering around 10 to 12 percent. And I doubt you’d get many arguments from consumers on that one. Manipulation of statistics was a key factor in neoliberalism – and it was global – providing the excuse by central banks and governments, that the changes in calculating statistics were made to comply with global standards. ‘Everyone else is doing it, so Australia will to.’

  2. GunnamattaMEMBER

    Could there actually be another ridiculous rainbow to fly up Australia’s economic keister?……..

    A ScoMo Friedenburg reflationary budget holding the jobs of the many to ransom for the tax cuts of the few, and house prices to alpha centauri B, right as the US swings to reflation in uber reflation and a degree of protectionism in a world reorganising itself into mega blocks, and a combination of climate change mitigation and defence related capability embedding resulting in trillions of printed dollars being made available at the same time as the whole notion of competition and efficiency goes out the window?

    Does the AUD matter if the economic policy of tomorrow involves nothing more than a doubling down on debt – real estate – and population ponzi

    Could we be that lucky?

    • boomengineeringMEMBER

      Will ask Niko the gold bug about physical gold, but not so sure as they may make that illegal
      Wouldn’t put it past them to invoke 10 year jail for anyone found to be hoarding the stuff.

      • I don’t think govt would confiscate property – be it your gold or any other asset – bad press – (or negative social media nowadays). However rest of world must be considering some kind of commodity anchor for a reserve currency – they’re not stupid. I think we have too much of a US focus. Europe looks good compared to the US. Good healthcare, happy productive people in general. Plenty of hi-tech companies. They are self sufficient if they need to be. 450M of them.

        • Amusing to see China and Russia merrily accumulating gold for the last decade, while several other of the ‘stans’ have been doing the same. Impossible, of course, for the US to respond militarily to redress that balance (owing to nuclear arsenals). I sure hope they have that 8,199 tons they claim they have, because if not, their military will effectively be neutered.

          • At least Australia will be fine cos we have so much of that sh#t still in the ground. It could be the thing that keeps us the lucky country.

    • Job keeper cost the Feds around $20 Billion a month. Loss of revenue and waived revenues, taxes, duties, tourists, students, rent, rates, everything all told has cost Australia a trillion dollars.

      Really can’t see it being less than that and in all likelihood it is much more than that. I have no doubt there are agreements in place regarding debt obfuscation and credit rating manipulations.

      Fact is though that the global credit / debt financial markets will have their day the sunlight – and that day is now only weeks away in my view.

      Australia has managed to completely delay all the effects of this virus. We have just shut the doors, closed the gates, pulled the blinds and gone into hibernation.

      But like New Zealand we have no choice but to face a massive economic impact – it is there, it will happen.

    • Arthur Schopenhauer

      It seems so. When less than 1% of the workforce produce over 50% of external revenue, it is entirely possible.

  3. Trump is not the type to get down from a punny virus ;-), it would get interesting if Biden gets positive too after the last “debate”

    A Biden win is now quite likely (unfortunately), which will boost the AUD well above 80c (to parity ?).Not Good 🙁

    • Of course it will – a Biden win means monster deficits. I mean, handouts for all (slavery reparations), debt jubilees for all manner of interest groups – students, people of colour, and so on ..

      Meanwhile, at this point, a property bust in this country is just somebody’s wet dream

      Forget 0.80 … it’s going to parity

    • The Traveling Wilbur

      I reckon Melanomia would be able to tell you that’s already happened more times than you might think.

    • It was the most beautiful thing, I died, three days the doctors told me I was dead for, I didn’t know it was three days, the doctors told me so, but they assured me I was dead. In that time, I was in a personal meeting with god, that’s right, just me and god, he requested to see me, so I went to see him, it was the most fantastic meeting, it was wonderful, we spoke for a long while, he’s a great god, he’s good friend of mine.

      He said to me, this is not me saying this, this was god speaking to me, he said, I need you to continue your presidential role, the U.S needs you, the U.S wants you, and so does the world, the world I created needs you.

      So here I am people of America, here I am, here from god, things will be so great, the economy, jobs, and America will be so great, your heads will be spinning over the greatness.

      Still a chance his infection mutates in something great.

  4. RobotSenseiMEMBER

    If I was a strategist, I’m not letting Biden go within a mile of Trump or his disease-ridden cronies, lest they pass the virus on. And I wouldn’t put it past them to either recklessly or deliberately do it. I don’t see a scenario where Biden and Trump debate again.

    • So perhaps it was the Biden camp that deliberately got within the important mile, and infected Trump, so the debates were cancelled? Makes sense!
      Trump may have never been the answer to anything. What he is, is a desperate hope for an alternative to what we had leading up to 2016, and electing ‘more of the same’ from those times isn’t the answer. ‘4 more years!’ may be unpalatable, but a Biden-fronted oligopoly would be worse.

      • RobotSenseiMEMBER

        That’d be an interesting theory but for the fact that nobody on the Democrat side – even Joe Biden of mask-wearing ridicule – has tested positive for Sars-CoV-2.

        He sure is a “desperate” hope though. He has no interest in performing the full spectrum of presidential duties. So why bother electing him? Why does he bother, but for a validation of his own ego?

        The Trump experiment was fun for a while. Now it’s a matter of life and death, both his own and his countrymen. He’s not the guy.

        • Robot its clear you don’t understand all the angles. Nobody thinks Trump is the answer but he is better than the alternative.

      • Wow! Great theory Janet.

        Face it, the chickens have come home to roost and the Trumpistas are still in denial. It’d be funny if it weren’t so sad.

        Where are all the comments now regarding Trump’s ongoing mental health and how it disqualifies him from holding the office of President?

  5. CraftsmanMEMBER

    From observations, Trump is just a counter weight to the democrats. To call him a mad man is calling the other side the same. If you look at most of his achievements objectively, not exactly a full horror show.

        • Cool story bro, anyway, I’m off to dinner at the pub, might stand at the bar and have a few drinks and then go to a night club and have a dance. I may be dumb but I’m smart enough to not live in hellbourne. All those brains of yours and all that money and you’re still a sad fckn piece of chit. I’ll take my chump job and happiness and head off to get a servo pie or a dagwood dog. Have fun being a sad wanker for the rest of your life.

          • Don’t know why your assuming he is smart. I follow his post closely and I would say an IQ of about 105 however is ideologically possessed. Some people can interpret that as smart but it usually means they are just a parot.

  6. I reckon quick recovery. Wont do second debate, par effort for third. Trump victory when we all realise covid is not worth killing the economy over. My 2 cents.

  7. reusachtigeMEMBER

    LOLOLOL. Trump is as likely to die as you evil scumbags are to get your housing crash!

    • Trump won’t die, but he may still lose the election… and if that happens, expect China to use the swap over to put massive tariffs on our IO. Biden won’t blink, and the Chinese know it. Then Australia is defenceless.

      Hope like hell Trump wins!

      • SnappedUpSavvyMEMBER

        Interesting, could happen, Biden wouldn’t do shyt you are right there, but our iron ore is like British opium all over again

    • Can we bet on him dying or not? I think he will get quite sick. Bojo style but he won’t die. Will it change his anti science perspective? No.

  8. Ronin8317MEMBER

    Regardless of Trump’s survival, the presidential campaign for entire month of October will be about COVID-19. This is not a positive for Trump. It also destroy the argument that you can protect the vulnerable from the virus without locking down. When even the POTUS can get it, nobody is safe. Of course, if Joe Biden gets COVID-19 from Trump and dies, the United State of America will not be ‘United’ anymore regardless of the ultimate winner.

    • The US is a dying empire. It doesn’t matter who is next President, it’ll just happen a bit quicker under one than the other.

      That is all.

      • I do like this argument. I suppose the opposite view would be that a democratic free society would be adaptive and therefore reginitative. Hmm the next few years are going to be interesting. I hope for my own interest the usa empire is a phoenix.

        • To clarify, the idea of the US empire dying terrifies me, given the alternatives, so my hope is that the ramifications of present policy are considered long before the inevitable.

  9. I reckon he’s in a bit of a trouble. It’s only been a few days since diagnosis and they are already throwing everything at it. Covid is a slow burn. If it hits, you don’t shrug it off in a matter of days.

  10. I find this constant criticism of the Trump virus response strange when Sweden went open slather and receives virtually no criticism. In the end Sweden have been no worse off than the rest of western Europe, the US, Mexico, South America.

    The states and cities had no way of stopping BLM protests and the burning, looting and murdering that followed so how were they ever going to enforce 6 week lockdowns across the country?

    Americans aren’t like Australians and nothing all like Chinese so stop trying to impose an Asian solution to a pandemic on Americans.

  11. Meanwhile Trump is on the roids
    More places going into lockdown
    Rabbitohs win the footy
    What could go wrong

  12. It’s all theatre, if Trump dies it’s off to war in the middle east, Belarus or wherever they can’t find the next man they don’t like

  13. Dexamethasone has been proven to be modestly beneficial in moderate (oxygen requiring) and severe (requiring ICU) COVID. However dex was actually harmful in mild COVID. (Oxford RECOVERY trial)..

    So if he is on dex, then he is a bit sicker than is being let on. Plus he has progressed pretty quickly.

    Looks like he is following a similar trajectory to Boris. But 20 years older.

    Would not be surprised if he has to hand power over to Pemce.

  14. Stewie GriffinMEMBER

    I don’t particularly like Peter Hartcher as I think he typifies the worst and most bias type of progressive globalist shill hiding in the media, a true wolf in sheep’s clothing who despises populism but has zero comprehension that the it is the beliefs and values he promotes that are the true source of populism’s rise.

    Never-the-less I still read him as he occasionally has something worth listening to, even if it is simply to gain an insight into how twisted and full of bigotry and hatred to those who think differently to him he is, however today he made a couple interesting observations about other ‘populist’ leaders who’ve had WuFlu and the impact on their popularity:

    There are precedents to guide us. The right-wing populist leaders of two other major nations have been infected with the virus. Britain’s Prime Minister Boris Johnson was careless of the virus and promised to keep shaking hands “continuously” until he was infected in March. He was admitted to intensive care, and later said that it “could have gone either way”. The result? His approval rating soared on his release from hospital and remained above his pre-hospitalisation level for a couple of months afterwards, even as the number of British deaths continued to mount.

    Brazil’s President Jair Bolsonaro dismissed COVID-19 as “a little flu”. He tried to force provincial governors to drop infection control measures in order to avoid economic slowdown. He was infected in July and emerged after only mild symptoms.

    The result? He was more popular a month later than before being infected. Today he is more popular than ever even though Brazil has suffered 140,000 deaths from the pandemic, second only to the US.

    https://www.smh.com.au/world/north-america/don-t-think-for-a-moment-trump-s-illness-spells-the-end-of-right-wing-populism-20201004-p561wx.html

    If Trump survives his trial by fire with Covid then those gamblers who took a punt on Trump prior to the betting markets being closed, may well end up with a winning bet of the year.

  15. Liquidity trumps all (pun intended)…..central banks and all Govts (now all socialists) will cushion downturn. Look for huge rally whatever the election result as whoever wins opens the spigots still wider….forget inflation it’s gone the way of the dodo….and if you’re still waiting to get a house…….get one!

  16. Can you imagine the field day that the conspiracy theorists would have if Trump were to die?