USA: Uncertainty about future economic policy slows down investment dynamics

The economic momentum in the USA remains intact. This is indicated by the good mood in the economy and among consumers, as well as the strong increase in employment, which became apparent at the beginning of the year. However, the presidential and congressional elections due in November will have a dampening effect on investment in machinery and other equipment. Last year, investment had already shown only modest growth, and in 2018 the reduction in corporate tax had only kindled a flash in the pan. This year, the unclear further course of financial and economic policy, but also the smouldering trade conflicts, should prevent a visible upturn in corporate investment, despite solid domestic demand.

The election results of 3 November, for example, may continue to cause a standstill in urgently needed investment in public infrastructure. A turnaround in fiscal and environmental policies could also be the result. The latter would be the case if the incumbent president were to be voted out of office and, at the same time, the Democratic Party were to achieve a full majority in Congress.

The good economic situation fundamentally argues in favour of Trump’s re-election. His support within the Republican Party has been strengthened by the fact that the impeachment procedure has now been terminated. Moreover, he is doing quite well compared to his 2016 election promises. Corporate taxes have been cut significantly, various environmental regulations have been eased and immigration has also become more difficult overall. In terms of trade policy, it can point to a new agreement with Mexico and Canada, as well as the Phase 1 deal with China. On the other hand, it has not delivered on issues such as reducing national debt, achieving economic growth of over 3 percent and renewing infrastructure. He also failed to change the existing healthcare system, more precisely the abolition of Obama Care. Furthermore, the incumbent president remains as controversial as none of his predecessors and there is much speculation about which candidate from the Democratic camp could cost him the most votes.

At the moment, it is impossible to tell in the Democratic Party’s preliminary elections whether the Democrats‘ future presidential candidate will be from the left or the moderate wing. Socialist Sanders is currently leading the field ahead of moderate Pete Buttigieg, while Joe Biden, who was also originally considered the favourite, is not very popular with the grassroots. However, the equally moderate Mike Bloomberg, who is also among the national favourites, has not yet run in the elections. The multi-billionaire and former mayor of New York is likely to score points, especially in the major states. This means that in a few weeks‘ time, there should be more clarity about Trump’s opponents and thus his chances, as well as the extent of the political change of course that may be imminent. Ultimately, however, many entrepreneurs are likely to wait for the congressional and presidential elections in November before making more extensive investment plans.

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