Undebatable: US Presidential Debate Triggers DefCon 1 for Democrats and Global Anxiety

I’ve long cautioned that it was too early to call this race given the number of variables and unprecedented factors - last night’s debate served to underline that point.?

?

Biden’s dismal debate performance upends the race. My view is he won’t be able to reverse the poor optics of his frailty. Democrats will now be forced to contemplate alternatives.?

In the short-term Trump is the clear beneficiary, and the Democrats have a weak track record on unity and cohesion even in the best of times. Either Biden steps aside promptly with time for a replacement to campaign, or Democrats lose. It is that stark.

?

But market participants should not interpret this to mean a Trump victory is more certain. Rather, the amount of uncertainty and volatility in the U.S. presidential campaign is about to skyrocket.

Prior to the debate I said that there were three S’s I would be watching for: Standing, Sentience and Swipes, meaning the swipes the candidates would be taking at each other. Biden managed to stand, but the impact of his efforts to make substantive answers to policy questions was overtaken by his raspy voice, occasional freezes and loss of his train of thought. The campaign noted that Biden was suffering from a cold, but in my view, despite Trump’s meandering and being frequently off point as well as the outright lies on a number of topics, was overshadowed by Biden’s alarmingly shaky performance, looking frail and at times, haunted, especially in side-by-side shots. It will be a very difficult if not impossible perception to reverse, and is unlikely to have played well with the large number of Independent and undecided American voters.

Fiction, Fantasy, and the 3 Ss: with Romaine Bostick and Alix Steel on Bloomberg TV

The Democratic party will now be in damage control mode, assessing the fallout and waiting to see initial polls, which will not come through for a couple of days.

?

But the fact is that Biden himself would have to agree to step aside, he can’t be pushed. An open Democratic convention in Chicago would certainly inject some energy into a race where many Americans are so-called “double haters”, disliking both candidates. But it would also open up a huge degree of uncertainty, with just months to go before the November ballot. Possible alternatives to Biden include California Governor Gavin Newsom, Michigan Governor Gretchen Whitmer, but they will not put their hand up and risk being seen to “push” Biden. Hillary Clinton or Barack Obama would also be reluctant to put pressure on him. The president has repeatedly made clear that he thinks he is the only candidate who can beat Trump, so the question is whether he can be persuaded that this looks increasingly unlikely. His other challenge is the unpopularity of his VP, Kamala Harris, who should by tradition take the mantle, but whose odds of victory are even lower than Biden’s.

?

Watching the political prediction markets during the debate was to see the odds shifting in real time. Ahead of the debate, PredicIt odds had Trump at 53% over Biden, rising to 61% by the end. A Democratic Party convention that features open conflict between a party where the Progressive wing is already at odds with the White House on policy on the Middle East and other issues is a distracting spectacle the party will want to avoid, with its unpleasant echoes of the Chicago convention in 1968 during the throes of the Vietnam War and civil rights movement

PredicIt Market Trends & Real-Time Shifts: Trump vs. Biden Debate

There was little in the debate for market participants to hold on to in terms of substance on the key issues for the US economy and fiscal outlook; no mention of the US debt time bomb, and only glancing references to tax policy that did not add fresh insights to the candidates existing positions. Trump had hinted that his VP candidate would be joining him in Atlanta for the debate, but no further hints have emerged. Volatility remains low and US markets continue to break new barriers, highlighting a continuation of the disconnect between the performance of the US economy and markets and the state of confidence in its political system.

?

The June US Presidential debate has succeeded in one thing—throwing the race open and injecting even greater uncertainty into a contest that many have framed as having an outsized impact on global stability, democracy and the rule of law. On an international level, US allies and indeed the global investors and corporates who I talk to on a daily basis have grown deeply concerned about the reliability of the US on NATO. The wider US security umbrella will be worried by the frailty projected by Joe Biden and concerned about the increased likelihood of the return of President Trump. In Europe there is talk of “Trump-proofing” Europe, plans for which will now accelerate.

With the first round of French snap elections taking place this Sunday and UK snap elections happening on July 4th, there is plenty of democracy on the ballot happening in the coming weeks.

G7 adversaries in Russia, China, Iran and North Korea will look to exploit perceived US political weakness and infighting. Countering these perceptions may be among the most crucial imperatives for the US political establishment in the coming weeks.