An attempted assassination is making Trump’s election more likely, with markets expected to focus on challenging foreign relations rather than domestic political polarisation.
When a lone shooter came close to killing president Ronald Reagan in 1981, a stunned US public recalled the assassinations of John F. Kennedy and Martin Luther King Jr.
This time round, when presidential candidate Donald Trump was shot in the ear in Pennsylvania, most of the comparative talk was of the Reagan shooting.
Despite talk of entering “unchartered waters”, this is anything but. Political violence is part of US life, culture and history. “Political assassination attempts are more frequent in the US than in other OECD countries,” says Benjamin Melman, Paris-based chief investment officer at Edmond de Rothschild Asset Management.
“Despite the drama, it doesn’t change the picture of the institution, because it seems no serious organisation threatening the institution was behind the shooter,” he says. “The Capitol assault is more controversial from that perspective.”
Capitol mob
Analysts were more concerned about acute political polarisation manifested in the insurrection of January 6, 2021, when a mob of Mr Trump’s supporters attacked the Capitol building two months after the 2020 election, trying to prevent accession of Joe Biden to the presidency.
Today it is foreign relations and their financial and market impact which appear more challenging to investors. “Despite the attempted assassination of Donald Trump, the resilience of US political institutions and principle of checks and balances provides the US market with the most stability when compared to most other significant markets in the world,” believes Yves Choueifaty, founder and chief investment officer of French boutique funds house TOBAM.
Financial markets, he says, have already adjusted to implications of another Trump presidency, focusing on policy changes in trade policy and national security. While polarisation and political tensions are global issues, the primary concern of investors rests around broader geopolitical risks involving China, adds Mr Choueifaty.
“The success of the assassination would have brought the US to unknown territories. But the long-term impact of political violence usually depends on broader contexts,” he says. “While Trump's attempted assassination is a major event, its direct impact on markets is light, apart from short-term [shortening] of his odds of being elected. Current financial market concerns are more focused on global geopolitical risks, especially involving China and Russia, than internal US divisions.”
Use of divisive messages through social media is likely to play a key role in November’s forthcoming election. “Social media’s infancy leaves it more open to bias and noise,” with the added challenge of filtering misinformation through fact checks to single out reliable sources, says Kaspar Hense, senior portfolio manager at RBC BlueBay Asset Management.
Energy independence
With the role of the “traditional press” as analytical intermediary between politicians and voters diminishing, politicians will address voters directly, without the analytical step, risking “populism and demagoguery”, suggests Mr Choueifaty. “It is often observed that in such circumstances, politicians will attempt to use other levers than analysis, such as fear, resentment, anger, or, in extreme cases, hatred.”
Some market watchers are more sanguine about prospects of a second Trump presidency. “We believe it remains key to look beyond any short-term alarms,” says Jonathan Tredgett, portfolio manager of the $11bn Findlay Park American fund in London.
“The attributes that have made America a great place to invest will likely remain intact – a shareholder friendly and entrepreneurial culture, deep private and public capital markets, a strong regulatory and political framework and energy independence,” he says.
“We have invested in America through six different election cycles and one of the key lessons from this experience is importance of staying focussed on identifying quality companies that thrive in any policy environment.”
The key economic policy of Ronald Reagan, who survived the 1981 shooting, was ‘bringing America back’, through reducing taxes, regulation and promoting free-market trade to boost growth and wealth. He also managed to vastly improve relations with Moscow, contributing to the Soviet Union’s eventual collapse.
Whether Mr Trump manages to achieve the same two goals after surviving a bullet, more than 40 years later, remains to be seen.
