Four years on from Donald Trump’s astonishing victory in 2016, the US is set to return to the ballot box. After that spasm of anti-establishment feeling and the rollercoaster ride of the last four years, the world is awaiting the result of the 3 November elections with bated breath. A Biden win looks likely, but a tighter-than-expected race remains plausible.
How reliable are the polls? Pollsters have had a torrid time recently, but in most previous US election campaigns they have reliably reflected the final vote – except for contests involving an outsider or a late political “surprise”. This time around, Trump is neither an outsider nor a surprise. But a tight result still can’t be ruled out. Polls are converging in several swing states, and the greater share of mail votes because of the pandemic is a wildcard. Keep an eye out for protracted legal disputes if the margins of victory are narrow.
Senate elections will be pivotal in defining the path of future US policies. Full Democrat control of Congress is probable, but is not a done deal and in any case not as likely as a Biden win. If both the Senate and the House went blue, it could pave the way for an ambitious Democrat agenda. In contrast, a split Congress would increase the chances of political deadlock.
Here are the three big “what if” US election scenarios in more detail:

What if Biden wins with a Democratic Congress?
- We expect a $2tn+ recovery package early next year
- Additional massive longer-term packages focusing on healthcare, infrastructure and clean energy funded by corporate, capital and individual tax increases
- Foreign policies would normalise with a return to a multilateral order and the repair of alliances with closest partners
- Pressure would be maintained on China through non-trade barriers
4 investment ideas for a Biden/Democrat victory
1. Invest in a green deal – Negotiated return to the Paris Agreement, tax incentives and major spending on clean infrastructure
Lyxor S&P 500 Paris-Aligned Climate (EU PAB) (DR) UCITS ETF
2. Invest in stronger alliances – Continued US-China competition, but less trade uncertainty and stronger US-Asia Pacific alliances
Lyxor MSCI China UCITS ETF
3. Invest in inflation – Massive budget deficit would boost growth and inflation expectations, while weakening the dollar
Lyxor US$ 10Y Inflation Expectations UCITS ETF
Lyxor Core US TIPS (DR) UCITS ETF
4. Invest in a sigh of relief – Reduced policy uncertainty and fewer bilateral trade offensives, massive US fiscal expansion to benefit other regions
Lyxor MSCI World UCITS ETF
What if there’s a tight vote and a split Congress?
- Possible legal disputes and further polarisation between US political forces, with more civil unrest
- Greater market volatility until disputes are settled
- Political deadlock and policy paralysis look likely if Congress also remains split
- If Biden eventually wins without a legislative majority, we might see an intermediate $1.5tn fiscal package
- With limited leeway to revamp taxes, the administration would concentrate on gradually tightening environmental, energy and financial regulations
- Trade uncertainties would recede, but tariffs would not be unwound without compromises
- Efforts to rejoin world organisations would be largely symbolic
2 investment ideas for a near “no result”
1. Invest in volatility – Heated legal disputes and civil unrest would increase uncertainty and market volatility. Risk aversion increases flows towards diversifying exposures
Lyxor FTSE USA Minimum Variance UCITS ETF
Lyxor Core US Treasury 7-10Y (DR) UCITS ETF
2. Invest in Tech – Lesser likelihood of major tech tax and ambitious anti-trust regulations, more limited fiscal expansion would favour the pandemic’s corporate “winners”
Lyxor Nasdaq 100 UCITS ETF
Lyxor MSCI Digital Economy ESG Filtered (DR) UCITS ETF
What if Trump wins a close-run race?
- A more modest $1-1.5tn fiscal package looks probable, with infrastructure spending, a focus on industrial reshoring as well as on SMEs, and further tax cuts
- Energy and healthcare deregulation would gradually continue, constrained by the legislative process
- Competition with China would intensify, with extra tariff and tech offensives punctuated by temporary partial agreements
- Unilateral pressures would continue, with no appetite for multilateral memberships and greater trade pressures on Europe.
3 investment ideas for a Trump turnaround
1. Invest in lower corporate margin pressure – Limited changes to the supportive corporate tax and labour wage environments, fading risk premium for the energy sector
Lyxor BofAML $ High Yield Bond UCITS ETF
2. Invest in “making America great” – Policy focus on domestic industrialisation, reduced corporate and capital gains tax risks
ComStage S&P SmallCap 600 UCITS ETF
3. Invest in Russia – Threat of increased sanctions under a Democrat administration fades
Lyxor MSCI Russia UCITS ETF