“Half The US Is In Ecstasy, Half In Despair: This *IS* A Political Revolution”

By Michael Every of Rabobank

The best of times, the worst of times

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way–in short, the period was so far like the present period that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

At time of writing, bar a truly unknown unknown that defies all possible electoral logic, Trump has won the 2024 presidential election (according to Decision Desk), and the Republicans also control the Senate, with the House perhaps slightly Democrat. Trump becomes the first person to win, lose, then win the presidency again since 1892, when Cleveland defeated Harrison. He did it with legal cases round his neck, most mainstream media against him, and parts of his own party, and with vastly lower election funding than Harris. Such an anti-establishment election victory is certainly notable at the very least, whatever else one can all it.

The good news is no unwanted waiting, lawyers, crisis, or protests – yet. However, half the US is in ecstasy, half in despair, and all the world as polarized. Bloomberg and The Economist will be wearing black for the rest of the week, based on their support for Harris, but recall however you feel, someone else feels the opposite, and that tale of two cities is in one country and on one planet.

The pundits who called this a “close” race or made methodologically questionable calls for Harris didn’t flag the huge shift rightwards. Trump won Iowa by 13, rather than losing it by 3, and won the national popular vote – and Republicans even took the governorship in Puerto Rico.  

Narratives will have to be constructed to explain ‘how this was possible’. Don’t expect much focus on policy, based on recent history. However, as it’ll be hard to blame the result on Russia when it’s coast-to-coast and north-to-south in America, perhaps it will put on Biden for not stepping down, Harris for not stepping up, or X as Steppenwolf.

Yet ultimately this was down to some people not being able to think how others do: “Who would vote for tariffs when all the Nobel prize winners and The Economist say they are wrong?!” – perhaps the people who lost, or fear losing, their jobs from the free trade by advised those prize-winners and that we-always-give-ourselves-the-prize newspaper? Exhibit A: pollsters vs. the Republican voters who wouldn’t respond to those they don’t trust, and the professionals –again– not properly accounting for that trend, or for the low-propensity voters who decided this was the year that they would turn up.

Yet should anyone really be surprised at an ‘out-of-the-norm’ electoral outcome that: 1) we were told was 50-50; and 2) at a time when the current president has a voter approval rating of just 41%; three quarters of the country feel it’s on the wrong track; we had such recent high inflation – which many people (apart from RBA Governor Bullock) clearly do not feel is “over”; and cultural and geopolitical wars rage? Did this all go away because of recent ra-ra media positivity and “rate cuts”? (As long bond yields have gone higher, by the way.)

For an example of the political mood, the CNN exit poll answers to “How do you feel about how things are going in the US?” were “Angry” (29%), “Dissatisfied” (43%), “Satisfied” (19%), and “Enthusiastic” (7%). The AP VoteCast poll showed 10% of voters want “small” change, 50% want “substantial change”, and 25% want “complete and total upheaval.”  

Look at the voting data, Trump won the majority of independents; he didn’t see the suburbs shift left; he didn’t suffer (unduly) from the loss of Liz Cheney Republicans; he made most of the white working class Republican, and the Hispanic and part of the Black working class; and as Hispanic voters were a larger share of the vote than Blacks for the first time in US election history, he saw a staggering shift in their votes towards him.

This *is* a political realignment in many senses. That doesn’t mean it’s all for Trump, according to many voters interviewed that was the case, but it’s certainly against “this kind of thing”, which covers a great many things, in terms of policy that Trump may want to explore as president. Like tariffs, for example, which we had of course already incorporated into our base case scenario. On fiscal matters, even if one assumes a slight Blue house, there may well be some bipartisan support for some of what Trump would like to do, especially if the popular vote is heading that way.

Note well, Mr. Market: but of course, it already has: at time of writing, US 10-year yields were +15bp; the dollar was up the most since 2020, with USD/JPY was -1.5% to 154, EUR/USD was -1.7% at 1.0743, USD/CNY was -1.1% at 7.18; Bitcoin was up over 7% to a new record of $72,893; and the Nikkei was +2.4% and the Hang Seng -1.8%. In short, not so much ‘vibes’, ‘joy’ and “Keep Kamala and Carry on-ala” as ‘angry/dissatisfied substantial change/complete and total upheaval’ and “Keep Trump-ala and Dump and Pump-ala”.

A Trump victory will also mean geopolitical realignments – and some are front-running that trade. Israeli PM Netanyahu shocked his country overnight by firing popular Defence Minister Gallant, ostensibly for being too dovish, just hours ahead of what some warn could be a window for Iran to attack it from multiple locations. (He apparently also wants to replace the head of the IDF, and the Attorney General.) The firing was of course about domestic politics: the drafting of the ultra-orthodox, on whom the government relies, and a new major national security/corruption scandal swirling round Netanyahu.

Ukraine, Europe, the Middle East, Africa, Asia, Oceania, Latin America – everyone will be thinking about the best of times and the worst of times ahead. Again, this won’t be done with joy in most places, or even keeping calm-ala, but more likely with a combination of both dumping and pumping.