Independent economic and investment strategy research

Amid a once-in-a-century pandemic, with new Covid cases surging to a third US peak, the Biden campaign has entered the final stretch of the presidential election with tailwinds at its back and a war chest flush with cash. With less than two weeks to go, polls point to a Biden win, but the ghosts of 2016 polling errors haunt those predicting this year’s outcome – handicapping what looks on paper like a high chance of a Biden victory.

Massive disparity has become the theme of the COVID-19 (“K”) recession, diluting the traditional link between asset prices and the real economy. Recessions usually add to inequality, but the pandemic is interacting with powerful secular forces to create an unprecedented divide. Central banks will adjust their mandates but this will be ineffective without unwavering fiscal support.

The Fed’s new strategy is putting pressure on other central banks to respond – what will they do?

• Central banks under pressure to respond to the Fed’s new strategy
• They can adjust inflation targets, but they can’t match jobs obsession
• 2020s “policy divergence” won’t be repeated – weaker USD over cycle

• Sound & fury brinkmanship gives Boris Johnson political cover for a likely deal...
• ... and political insurance against a little-noticed no-deal ‘vassalage’ trap
• But a deal will still be an uncomfortable step down for UK business

The going for the UK will get tougher as the post-reopening bounce comes to an end. We think the worst-case scenario on Brexit will be avoided – but a deal will do little to make the UK’s winter more comfortable.