2024 US Presidential Race

by Trent Wiseman and Sean Tweedie | March 12, 2024

The US presidential election to take place in November 2024 is arguably the most important geopolitical event of the year. Based on historical outcomes, the odds are in favour of Republican candidate and former president Donald Trump. Historically, an incumbent US president (a US president currently in office) has been re-elected 67% of the time. This percentage increases to 80% where there is not a recession in the year of the election.
See Figure 1.

However, history shows that when a recession occurs in the year of the election, an incumbent president is re-elected only 44% of the time. Looking at the years following World War II, this further drops to 33%. While Biden’s administration, supported by the Chairman of the Federal Reserve Jerome Powell, have so far avoided a recession the general consensus is that the US will enter a recession in the latter half of 2024.

The historical trend of incumbent presidents losing out on re-election during recessionary periods, coupled with the fact that Trump is currently polling above current Democratic president Joe Biden, highlights that the Republicans could unseat the Democrats in November. However, the margins will be extremely tight with Trump’s approval rating currently polling close to 46%, while Biden is close but lagging behind with an approval rating closer to 40%, as seen in Figure 2.

If the Democrats secure a second term it is unlikely that they will be able to effect significant change over the next four years as it is likely that a gridlock scenario will prevent major legislative changes . It is probable that the Republicans will win full control of Congress. This is coupled with the fact that there are currently six Republican Supreme Court judges to the Democrats three. As such, a Republican victory at the presidential level in November will bring with it full control of congress as well as a majority in the Supreme Court. This will result in a rather rare opportunity for the Republicans. They will be able to enact structural and significant change to the economy and political system.

These policy changes are likely to continue the trend that Trump put into motion during his first term as president which came to an end in 2020. These policy changes include;

  • Reducing corporate and individual tax in order to boost economic growth and make the US more attractive to international investors.
  • Reinforcing price stability (low and stable inflation) as the dominant objective of the Federal reserve.
  • Enforce current trade tariffs and impose new tariffs that will counter unfair practices that lead to distorted trade. While encouraging new trade agreements such as the United States Mexico Canada Agreement (USMCA), which updated and replaced the North American Free Trade Agreement (NAFTA) in 2018.
  • Roll back the Democrats’ initiative to drive out fossil fuels while encouraging the development of nuclear energy as a clean and sustainable source of power.
  • Prioritise legal immigration based on merit to ensure that individuals immigrating to the US are skilled, while increasing border security to limit illegal immigration.
  • Strengthen foreign relations with the US’s military allies and working with these allies to ensure that all nations contribute their fair share to NATO funding (2% of GDP).
  • Restore the regulatory requirement that for every new regulatory bill there must be two deregulatory bills to counter.
  • Prohibit members of congress from owning and trading stocks in their individual capacity.
  • Improve access to medical services, and remove geographical restrictions, while reducing the prices of prescription and non-prescription medication.

However, even if the Republicans have control of Congress they will struggle to enact all of their desired policy changes. They are likely to be met with significant opposition from federal bureaucracy, public opinion and the media. That being said, at this juncture it may be useful to evaluate high conviction views of what will not change should Trump win. Three such views are:

    1. The US will maintain its geopolitical dominance. The US today accounts for 25% of global economic output and 40% of global military spending. Its share of output and spending has risen, not fallen, since 2014. US growth and innovation, combined with China’s economic struggles, make it unlikely that the US will lose its prime geopolitical position over the next four years.
    2. Geopolitical rivalry will be maintained. Trump will likely withdraw support for Ukraine, forcing it to accept a ceasefire with Russia. This will likely embolden Russia. Trump’s threats to withdraw from NATO or deny collective self-defence could motivate Russia to encroach on NATO members’ rights. Furthermore, Iran’s pursuit of nuclear weapons, and Trump’s policy of maximum pressure, could cause a greater conflict in the Middle East.
    3. Tariffs will not fall, but rather increase off the back of Trump citing national security justifications.
    4. Corporate taxes will not rise. Should the republicans win control of Congress, then Trump’s 2017 Tax Cuts and Jobs Act will likely be made permanent, together with further tax cuts.

Regardless of the outcome of the election, markets will be tentative leading up to and during November. The US dollar will likely strengthen as investors seek the security of safe haven assets.

Do you need assistance navigating the volatility of the currency markets? Contact Dale Petersen on 021 819 7802 or at dpetersen@wauko.com. We’d love to connect with you.


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