Don't lose sleep over the debate

Posted by: Paul Donovan

29 Sep 2020

Daily update

  • European and Asian investors can sleep through today's US presidential debate without fear of missing out. Debates rarely launch new policy initiatives. The spin after the debate is what matters. Polarization means that committed supporters will not change their views, and the number of undecided voters is lower than four years ago—but still large enough to affect the election outcome.
  • US trade data is due. US President Trump's trade taxes on US consumers and companies have not changed import patterns, although in some cases supply chains have adjusted. Inventory data is also released—the initial surge in demand after lockdowns was met by using inventories, and these need to be rebuilt.
  • There is (predictably) more media chatter comparing the US and European economies today to Japan's "lost decade", with rising debt and lower growth. This misses the point. Japan's lost decade had zombie companies absorbing all the bank finance and labor, preventing entrepreneurs from starting up. US, UK and most European economies are currently experiencing a business creation boom.
  • Japanese consumer price data was released, and was unexciting. German and Spanish consumer price data is due. In many economies, consumer price data is reported lower than reality, as changing consumption patterns are not being incorporated.

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