No directional trend in US market for next 3 wks?

I do not think that President Biden is just going to sign off on all those huge tax measures willy-nilly and if he did, then it would be very damaging. But I believe Trump’s second term is going to be very radical, says Manish Singh, Chief Investment Officer, Crossbridge Capital LLP. How crucial will be the presidential debate tomorrow between President Donald Trump and Joe Biden?What I would say is that the risk of contested elections is definitely rising given the narratives which are being put in place and, of course, postal ballet is a significant thing this time. Having said that, I would say the risk may be overplayed as well because a lot of people will over interpret. I still see the Covid-19 causing people to take some risk off the table. I do not think that there is a second wave. This is just a resumption of the spread from the first wave because we got locked down and when we restarted, it is going to spread again and that is what is happening. For me in terms of the direction of the market, it is going to be a sideways market from here until the US election. There are no two things about it. You are going to see these rallies like you had on Friday from oversold levels. But again, once you get another 5 points up, people are going to sell again and this is going to happen until the elections. I do not see any directional trend in the market for next three weeks at least. What is your view on the coronavirus stimulus relief package because House Speaker Nancy Pelosi said on Sunday that the last minute coronavirus aid deal still remains on the table. I strongly believed that we would see a deal before the end of September which obviously is not happening from where things are. I would put only a 50% probability that they will do a deal before the election date. After the election, whoever wins, there will be a deal because they will help the US consumer. This could be now used as a weapon. The Democrats think that you do not want to send a cheques to everyone’s home with President Trump’s sign on it. Maybe they will keep it back and not deliver but then they are taking a big risk because they could be accused of not helping the people and that is something that Nancy Pelosi now has to decide. But the probability of a deal before the election is only 50%. Earlier, there was as high a chance as 80-90%. I have lost faith that they will do a deal before the election but it is still possible and not as likely as I thought before. We do not know who the next US president is going to be but Joe Biden has already hinted that higher taxes for corporates will be very much on his radar.One thing I can tell you that Trump second time around is going to be extremely radical. What I hear from my friends in the US is that the second term of the US president is going to be very radical to the extent that people may not even contemplate. I have a very strong belief that the US will become a low-tax country, a bit like what the UK is trying to do, a huge cut on regulations are coming down the line. It will be extremely simulative for the economy and for businesses and for corporates. And on the other hand if President Biden comes in, then clearly you expect the taxes to go up. But I do not expect that even President Biden will go full flow in terms of what the likes of Elizabeth Warren wants them to do in terms of increasing the taxes massively because that will be very damaging to the economy. I do not think that President Biden is just going to sign off on all those huge tax measures willy-nilly and if he did, then it would be very damaging. But I believe Trump’s second term is going to be very radical.

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