Both the polls and the bookies see Gentleman Joe making short work of Delirious Donald. But let that not blind us to the fact that this US election is all about Trump. The only reason for Biden winning, if he does win, is because he isn’t Donald Trump. That’s the impact The Donald has had as President of the United States. His antics---one can hardly call them policies-- have destabilised US society to such an extent that even US business, traditionally staunchly Republican, has been contributing handsomely to Biden’s kitty rather than to Trump. This FT piece put it succinctly—Trump is no longer seen as good for business.
Not that a Biden win can put the clock back. The high noon of globalisation, which did so much to help countries such as China and India lift millions out of poverty, is gone for good. After all, the reason why Trump triumphed in 2016 was because of widespread disenchantment with the dishonest promises of the liberal establishment, of which Hillary Clinton exhibited the worst qualities. Nevertheless, the current US election is a watershed and will have a big bearing on America’s global role.
The reduced uncertainty once the results of the elections are clear should help markets rally. Some sectors, notably Big Tech, have shown they are immune to both politics and the pandemic. Of course, much depends on whether the markets have already discounted a ‘Blue Wave’---a Biden victory plus Democratic control of both houses. The hope is that it will clear the way for a humongous fiscal stimulus.
US GDP growth for the September quarter came in at -2.9 percent year-on-year, a saner measure than the annualised sequential growth, which was a highly misleading 33 percent. October’s flash PMI reading for the US was also a bright spot. But the worry is that the dreaded second wave of the coronavirus will slow down the economy, in which case the stimulus will come in handy.
Back home too, there are signs of a recovery, although we need to wait and see whether the bounce will extend beyond the festive season. The earnings season has been a source of good cheer for many companies, with the damage from the pandemic turning out to be less than anticipated. We found, for example, that even cyclicals such as L&T showed an improvement in their core business.
Indeed, the September quarter results showed green shoots in several sectors. Among auto stocks, we looked at Hero MotoCorp and Maruti, although the latter’s valuations made us pause. We were a bit iffy about Tata Motors, but we liked its deleveraging plan. Companies such as Havells have seen demand pick up through e-commerce channels. The rural recovery theme was evident in PI Industries and M&M Finance. Among banks, we said Axis Bank is due for a re-rating, while it’s not just quality but also growth at Kotak Bank. But we balked when it came to Yes Bank.
Among others, Airtel’s numbers were excellent. A recovery is in sight for all Titan’s business segments, while demand picked up even for Indigo, although we did ask investors to wait before venturing into the pandemic-hit sector. And we analysed in depth Pidilite’s acquisition of Huntsman’s consumer adhesive business.
There were the usual worries about valuation, but Mirae Asset MF’s Neelesh Surana assured us the market isn’t expensive from a three-year standpoint, while Axis MF’s Jinesh Gopani said they’re playing the recovery theme through quality stocks. For the nay-sayers and the fence-sitters, there’s also the promise of a surge of fund inflows as a result of increasing India’s weight in the MSCI index.
There was no dearth of the usual negative news though. Not much support can be expected from the central and state governments, because of their precarious finances, which is also a risk for the sugar industry. What’s immeasurably worse, in these coronavirus-infested times, is the sorry trend in spending on health by the states. That’s not all---the potholes in road construction have to be filled, the rise in freight cost needs urgent attention and the government is undoing its own agricultural reforms with its onion policy.
I’ll leave you with this gem of a tweet from Existential Comics on the US presidential elections: ‘Can't wait to vote this fascist out of office and vote back in the conditions that gave rise to him.’