Biden’s Election Issues and Market Impact

As you may already know, France’s left-wing New Popular Front coalition has thwarted Marine Le Pen’s National Rally in a stunning upset, leaving the country without a clear majority in parliament. President Emmanuel Macron’s call for political parties to form a governing coalition reflects the deep uncertainty rocking the country. “No one could win,” Macron said in an open letter, highlighting the political limbo France now finds itself in.

The impasse couldn’t come at a worse time for France and its economy: the Olympics are due to start within weeks, high debt and persistently high wage inflation continue to hinder growth, unsettling markets and significantly complicating the European Central Bank’s task of maintaining stability across the eurozone.

France, the seventh-largest country by GDP, casts a large shadow. Accounting for 20% of the eurozone economy, France looms large. Investors should be mindful that this situation could lead to increased market volatility not just in France but across Europe. The FR40, which tracks the 40 largest French companies, is up just 2% year to date, while the EURO STOXX 50 is up 11% over the same period.

Western countries are lacking leadership

France is not alone in facing a leadership challenge. When G7 leaders met in Italy last month, their unpopularity was clear. Italian Prime Minister Giorgia Meloni is the most popular of the group, but even she has an unapproval rating of 52%, according to Morning Consult. Compare this to Indian Prime Minister Narendra Modi, who enjoys an astounding 70% approval rating, and it is clear that many Western countries suffer from a leadership deficit.

I think it is no exaggeration to say that the world is in a state of permanent crisis, a prolonged period of global instability. According to the Conflict Data Programme at Uppsala University, the past decade has seen more armed conflicts involving state and non-state actors than at any time since the 1970s. This signals a lack of strong leadership and commitment to peace, with significant implications for global markets and investor sentiment.

Biden’s post-debate election outlook

As we all know, President Joe Biden faces his own challenges: Following his disastrous debate defeat, a Washington Post/ABC News/Ipsos poll found that a staggering 56% of Democrats want Biden to drop out of the 2024 race. Even celebrities like George Clooney have publicly urged Biden to drop out, citing concerns about his cognitive abilities.

Saturday’s assassination attempt on Donald Trump has sent the former president’s approval rating soaring in the polls, but it remains to be seen whether that goodwill will continue until Election Day, just over 110 days from now.

Despite these challenges, presidential forecaster Alan Lichtman, who has used his “Keys to the White House” system to accurately predict the outcome of all but one election since the early ’80s, still sees Biden as having a slight advantage, thanks in large part to the current strength of the U.S. economy. The International Monetary Fund predicts the U.S. economy will grow 2.7% this year, more than double that of other major developed countries, and Capital Group argues in a mid-year report that the U.S. is “once again playing a vital role as the growth engine of the global economy.”

The US stock market has also been exceptionally strong this year, working in Biden’s favour: The S&P 500 was up more than 18% so far this year through July 11, making 2024 the best election year for the stock market since 1996, when President Bill Clinton and Senator Bob Dole fought a fierce battle.

Gold nears all-time high

In these uncertain times, I still believe gold is a beacon of stability. As of this writing, the metal is trading at $2,415 per ounce, down about 1% from its all-time high. A slowing Consumer Price Index (CPI) and rising unemployment rate increase the likelihood of a rate cut in September. I expect gold to benefit if the Federal Reserve acts. Diversifying with assets such as gold provides a hedge against the economic and political uncertainty we face today.

Stay informed, stay vigilant, and invest wisely!