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LGT Navigator: Will the first virtual convention put Biden/Harris on the road to success?

August 18, 2020

Renewed tensions between the US and China, mixed economic data and the ongoing conflict in Washington over a further corona aid package led to investor restraint on the one hand, while strong demand for technology stocks drove the US stocks on the other. The US election campaign is now increasingly moving into the focus of capital markets after the virtual Democratic Party Congress started yesterday.

Virtual party conference of the Democrats to put Biden/Harris on the road to success

The Democratic Party Congress is a premiere in the tradition of conventions in the United States, which dates back to 1831. Due to the corona pandemic, the four-day party conference will be held purely virtually for the first time. This may not make it easy for challenger Joe Biden to create enthusiasm among Democratic voters. The Biden/Harris ticket must try to position the election on November 3 as a referendum on incumbent Donald Trump and thus win over the broad political spectrum of the Democrats and above all the mass of non-voters. At the nomination party conference, former first lady Michelle Obama has already campaigned for the presidential candidate Joe Biden. Donald Trump is simply the wrong president for the USA, Obama said.

At the beginning of the week, investor restraint prevailed on the New York Stock Exchange, and the Dow Jones Industrial Index fell by -0.31% to 27 844.91 points. By contrast, the S&P 500 rose by +0.27% to 3 381.99 points. Technology stocks were in particular demand, and the Tesla share reached a new record high.

US postal ballot in the center of the election fight

Nancy Pelosi, the Democratic Speaker of the House of Representatives, called all members of the House back from the summer break. The background to this is the dispute over financial aid for the structurally weak US Postal Service as part of the controversial new Corona aid package. Pelosi wants to have the members of the House of Representatives vote by the end of the week on a bill that is intended to prevent interference with postal operations. The main fear is that it could have a direct impact on the presidential elections in early November. Due to the corona pandemic, significantly more Americans are likely to cast their votes by postal vote, which could tend to be to the disadvantage of the Republicans.

Ice Age between Washington and Beijing

The talks between the US and China on progress in the trade agreement, which were postponed indefinitely over the weekend, indicate that the mood between the two countries remains tense. In addition, the US government yesterday blacklisted another 38 companies from Huawei's corporate environment. This means that a total of 150 Huawei companies are now affected by the sanctions in order to prevent the Chinese group from accessing American technology. US President Trump on Monday reiterated his accusations against Huawei that the Chinese company was spying on US know-how. At the same time Trump also increased the pressure on the Chinese parent company of the video app Tiktok to sell its activities in the USA.

The tensions between the US and China also weighed on stock market sentiment in Asia. In Tokyo, the Nikkei index traded lower 23 059.02 points (-0.16%). The futures signal a somewhat easier market start for the European stock markets. 

New York industrial indicator falls back again

According to the latest survey results of the New York Federal Reserve, the mood of industrial companies in the region deteriorated again in August, which means that the recovery after the collapse in the corona crisis has come to a standstill for the time being. The Empire State Index dropped to +3.7 points from +17.2 in July (consensus +15.0). In April, the indicator had registered a record low of -78.2 points in the midst of the corona crisis.

US housing market mood recovers

According to the National Association of Home Builders (NAHB), the US real estate market appears to be recovering from the Corona-related slump. The NAHB home market index rose by six points in August compared to the previous month to +78 points (consensus +74), compared to a low of +30 points in April as a result of the pandemic.

Bundesbank expects strong short-term economic recovery

The Bundesbank assumes that the German economy will recover from the corona shock in the third quarter and grow strongly. In its monthly report published yesterday, the central bank expects a clear and broad-based recovery after the massive economic slump in the second quarter. On the one hand, consumer spending is expected to increase, also thanks to the temporary reduction in the VAT, and on the other hand, investments in industrial equipment are expected to rise again. In addition, the labor market situation has stabilized somewhat. Nevertheless, according to the Bundesbank, a rapid return to economic normality is not to be expected. Regardless of the ongoing catch-up process, the pre-crisis level will still be missed by a considerable margin in the summer quarter and beyond, it was said.



Economic Indicators August 18

MEZ Country Indicator Last
14:30 US Home Starts (July, m/m) +17.3%
14:30 US Building Permits (July, m/m) +2.1%

Earnings Calendar August 18

Country Corporate Period
SZ Geberit Q2
US Home Depot Q2
US Walmart Q2


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Source: LGT Bank (Switzerland) Ltd.

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