Mike Medeiros, Wilmington Management Manager
High Chance of Biden Winning but Market May Face Turmoil Until Electors Are Confirmed
Bank Regulations May Tighten Depending on Treasury Secretary's Stance
[Asia Economy New York=Correspondent Baek Jong-min] Michael Medeiros (photo), portfolio manager at Wellington Management, a well-known US asset management firm, predicted the possibility of increased inflation if Joe Biden, the Democratic presidential candidate, is elected and the Democrats secure majorities in both the House and Senate, resulting in a 'Blue Wave.'
On the 27th (local time), Medeiros cautiously forecasted during an online meeting of the International Financial Consultative Group, a gathering of Korean financial institutions in New York hosted by Korea Investment Corporation (KIC), saying, "The market estimates Biden's chances of winning at about 85%, but I see it at around 65%."
He anticipated that if the Democrats control both the House and Senate along with Biden's victory, large-scale fiscal spending would follow, increasing the likelihood of inflation. Conversely, if President Trump is re-elected, fiscal spending would likely be less than that under the Democrats.
Expecting delays in confirming election results due to a surge in mail-in voting, he explained, "Market turmoil is inevitable until the Electoral College vote on December 14." He suggested that volatility could dominate the market for about 40 days after the election. He also conveyed that there are considerable market concerns about whether President Trump would concede if Biden wins.
He presented a scenario where "Although Biden is leading, if President Trump wins in the four battleground states of Florida, Arizona, North Carolina, and Pennsylvania, he could succeed in securing a second term."
He particularly expressed concern that if election-related confusion persists, the US government might fail to agree on a budget before the temporary budget deadline on December 11, potentially leading to a government shutdown. Additionally, he explained that failure to pass follow-up legislation for the unemployment benefits support program, which ends this year, could significantly harm economic recovery.
He forecasted that even if Biden is elected, tensions between the US and China could intensify. Biden might take a more aggressive stance than President Donald Trump on issues such as China's human rights and intellectual property rights.
Medeiros analyzed that the outcome of Joe Biden winning and the Democrats holding majorities in both the House and Senate would be positive for financial markets, but he judged that stricter regulations on the banking sector would be unavoidable.
He noted, "Lael Brainard, Fed Governor; Janet Yellen, former Fed Chair; and Elizabeth Warren, Senator, are all candidates for Treasury Secretary," and predicted that regulations could be stronger than expected depending on the next Treasury Secretary's disposition.
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