It was all heat and no light at the first US Presidential debates between President Donald Trump and former Vice-President Joe Biden today, as the proceedings quickly descended into a farce. Trump’s regular interruptions of Biden’s speeches - which moderator Chris Wallace proved powerless to stop - meant that viewers often strained to discern any coherent line of argument in the melee as Biden struggled to get a word in edgewise through the President’s shouting. 

“Overall, the debate was neutral and neither candidate came across significantly better than the other,” says Vasu Menon, Executive Director of Investment Strategy, OCBC Bank. He thought that while Biden was calm and addressed key issues raised by an aggressive Trump, he came across as less forceful in articulating his message. Issues important to investors such as the economy and the Covid-19 pandemic were not meaningfully addressed above the noise. 

Not that the debates were going to prove particularly consequential anyway, with 90% of the electorate having already decided on their candidate and voting already under way in some states. Considering Biden’s lead in the polls, says Jeffrey Halley, Senior Market Analyst, Asia Pacific at OANDA, all he had to do to win was to turn up and avoid any controversial remarks. 

“Yesterday’s morning audio comment suggested that investors should sleep through the US presidential debate. In the aftermath of the debate, I stand by my original statement,” says UBS Global Wealth Management Chief Economist Paul Donovan. Besides the hyper-partisanship of the US electorate suggesting that the debaters were merely preaching to a choir anyway, Donovan says that the exchanges are usually more about “spin” than new policy initiatives, suggesting little real impact on markets.

“I think the market outcome from the debate is fairly neutral… The debate did not seem to move the dial in any big way on electorate sentiment,” Menon added. The real race, says Halley, is for the Senate. A Republican senate can use their “power of the purse” to block Biden’s economic agenda. A Democratic Senate could pave the road for Biden to pursue his promised rise in corporate taxes from 21% to 28% as well as US$15/hour ($20.53) minimum wage.  

“Markets have remained calm as no policy surprises have emerged from the debate so far. US equity index futures have rallied in Asia after falling overnight, as the uncertainty ahead of the debate has subsided,” he writes in a post-debate commentary in the wake of the debate. US index futures rallied during the exchange due to the lack of economic or policy surprises. 

The uncertainty surrounding the debate has also seen a two-day rally for gold - which rose 0.85% to US$1897/ounce having flirted with US$1900 - as investors hedged their bets against political risk arising from the exchange. Once more, the anti-climatic nature of what effectively amounted to a “haranguing session” by Trump meant that some risk aversion positioning has been unwound, with gold prices falling to US$1888/ounce in Asia. 

A weaker US Dollar has been another factor driving up gold prices. Despite Wall Street still in the throes of market correction, the US Dollar still fell overnight due to end-of-month and end-of-quarter flows by institutional investors. Having breached its support at 94.00, it suggests that the greenback’s short squeeze may have run its course for now. 

More importantly, the US will release its Non-Farm Payrolls data on Friday. With congress not yet having agreed to a follow-up stimulus package despite urgent cries for help from the Federal Reserve, markets are fearful that US economic recovery could stall. A weak number on Friday could deepen these fears and weaken market performance going into the weekend. 

Despite the largely inconsequential and unfruitful nature of the debates, there are likely to be further such exchanges going forward. While there are concerns that getting shouted down by Trump would make Biden look weak, his running mate Kamala Harris promised CNN that Biden would not turn down an opportunity to speak directly to the American people. 

Nevertheless, considering that the 77-year-old Biden will likely be a “one-term president”, vice-presidential debates next week will likely receive more attention than usual. Harris and Vice-President Mike Pence are seen as “heirs-apparent” for their respective running mates. Halley therefore sees the vice-presidential debates as more crucial than usual in determining the outcome of the polls by giving the electorate a sneak peak into the future of their country. 

According to The Economist, Joe Biden is very likely to beat Donald Trump in the electoral college with a 7 in 8 chance of victory. He is expected to win 334 votes to Trump’s 204. Polling website FiveThirtyEight’s aggregate of national polls in the US sees Biden 7.1% ahead in the race at 50.2% to Trump’s 43.2%.