Who Will Seize The White House? Trump Vs. Harris Debate Analysis & Prediction | Matt Gertken

Intro we're going over highlights of the last presidential debate and whether or not the debate itself has changed odds for either Trump or Harris and ultimately uh who is more likely to take the White House by November Matt Gerkin is here to give us his outlook on not just the elections but also the macroeconomic landscape he is the chief geopolitical strategist at BCA research you can check out our prior interviews uh down below earlier the year uh when Matt and I have been talking about uh this issue he's been um focused on uh who's going to win and he has a very important update for us thank you very much for joining us once again thanks for coming back yeah thank you David it's always a pleasure to be on your show uh pleasure to host you uh first of all we were talking about offline uh you were uh calling for more of a trump win earlier in July and then and then now you're favoring the Democrats with I believe you told me 55% chance of winning so we're going to get to that in just a minute but I want to talk about the debate itself first I was Debate and election odds following the debate and throughout the evening uh Harris's whole uh chances on polls and as well as on Betty markets seem to have risen a little bit throughout the night so it started off um with the Trump lead on poly Market at the end of the night and I'll show a screenshot that I took it was 4949 now today on Thursday as we speak it's now back to 49% Trump and 50% uh Harris so slight lead in Harris's favor did the ele did the debate itself change anything did it actually change the odds in favor of Harris by the end of the night well yeah the way that I sort of would view that it's it's not the debate alone but basically she had received a nomination bounce and that was reflected in the opinion polling and then you would expect that polling to sort of mellow out which it which it did and and there have been a couple of polls since her nomination that have been pretty concerning for the Democratic party what we see with the debate is that she really held up and basically showed that she's perfectly acceptable as a candidate uh she and she convincingly showed that she the voting for her would be turning the page or going to the next chapter and not going backwards and as long as the economy is expanding with a ruling party in power after only four years um then that's likely to be the winning case so basically there was no reason to expect that she would implode the way that Biden did in late June but what she showed is that voting for her is moving forward and then of course Trump he he himself did not perform well and many of his own supporters and many republicans in Congress agree with that statement let's talk about your outlook then so prior uh earlier in the year you had told me that you had favored more of a trump Victory uh now you're swinging towards the Democrats why the switch Yeah well specifically for the past two years I've highlighted Democrats would be favored and again that's just historical patterns they have a 56% chance of re-election uh if there's no recession and and we we've basically seen there is deterioration taking place in the job market and that's extremely critical over the next two months but we are not imminently sliding into recession and so so that that's a really critical question over the next two months but as long as you don't see that sort of collapse into a recession then then basically Democrats are favored now where I where I temporarily believe that Republicans were going to win was in July and August after Biden fell apart after Trump was nearly assassinated there was just an enormous momentum behind the party at that time and I also expected that Harris would get a nomination bounce and it would fade what I think we can see now is that her nomination bounce is extended and that that that stems from these fundamentals and and the fact that as long as you don't have you know like for example Pennsylvania is the critical state in the election unemployment rate in Pennsylvania is very low and flat it's not rising and that's good for Harris before we continue with the interview I want to tell you about another way you can invest your Bitcoins and store them safely instead of using a traditional wallet or an exchange consider an IRA today sponsor itust capital is one such Ira that offers 35 crypto assets and the lowest trading fees in the crypto Ira space at 1% only and being an IRA it also offers unique tax benefits if You' like to get started and learn more click on it trust. Capal David in the link down below or scan the QR code up here if you're over 18 and you want to open a new account with cash or roll over an existing account you can do so using my referral link and if you use that referral link you'll get $100 in signing bonuses what would change your mind um before November yeah I a few things could really tip this so to say that Harris has a 55% chance of winning is also to say that Trump still has a 45% chance which is very high odds and and clearly then this is also a low conviction call it depends on what happens what really can change here first of all is like I mentioned the job Job market and recession market is deteriorating so Georgia North Carolina Michigan Ohio Nevada these places are all seeing Rising unemployment and in some cases pretty pretty uh significant uptick and that means that we are moving into the Slowdown phase of the business cycle ultimately we'll be going into a recession and when the stock market cannot when the stock market gets to the point where it recognizes this you can have a correction in the equity Market you can even sink into a bar market and if that happens in September or October well that's going to be the death Nowell of the administration because it normally occurs that the market has a correction if we're going to have a change of party it's a forward-looking indicator it's not that every voter cares that much about the stock market but it would simply cancel the Good Vibes that that Harris is enjoying as part of the ruling party so I think that's a really critical Dynamic and one one of the thing I would mention is global instability we're definitely seeing Decay on the international front Biden foreign policy is coming apart at the seams and if that results in a major crisis that embarrasses the Biden and Harris Administration um in an election this close that really could uh tip the scales in favor of Donald Trump okay let's examine their uh economic policies and what may happen to the economy under either Trump or Harris Administration uh Trump again doubled down on tariffs uh including a 20% levy on oil imports up to 60% um on Chinese Goods he also recently made the statement not during the debate itself but he made the statement um earlier last week that uh should trading partners not cooperate with the US in some way and should they abandon the dollar for his uh for his words then he may consider a 100% tariff Tariffs uh on imports from those countries um of course Harris during the debate shot this down saying this is a tax on consumers uh issue right well it is true that consumer prices would go up and companies that have to pay the tariffs would pass those on so and it is a it's a tax for sure tariffs are a tax on trade so that's correct you know the thing about this is first of all Trump is posing a credible threat right everyone should believe President Trump when he says that he's willing to use broad-based unilateral tariffs he almost single-handedly brought the tariffs back into you know modern economic policy and uh the Biden Administration stuck with those tariffs and in fact expanded t tffs so what we do see is that the US ruling Elite are generally coalescing around an economic nationalism or a protectionist stance now that especially has to do with China but of course in Trump's case it would involve broader protectionism including like you mentioned this Global tariff which uh you know Richard Nixon did a 10% import surch charge in 1971 so if Nixon can do it again we should believe Trump when he says that he's willing to do it he's doubling down on this by raising the potential for other tariffs he said 20% on All Imports and he also said that 100% tariff on on countries that dollarize so I think this shows that he's pitching directly for that Midwestern voter who is you know maybe Works in a factory or once worked in manufacturing um has long seen the decline of us industrial uh activity and has really uh decided that it's time for the US to defend its own Market in the face of China and this is a Pennsylvania bid if Trump can win Pennsylvania he probably wins the election he's very likely to win Georgia so he just needs Pennsylvania and and you know or Michigan um and he will win the election on that basis so uh so so that's why we're going to see this protectionist rhetoric continue through the election what does protectionism actually do for the economy well I mean first thing is first what it does is it says that other countries need to negotiate with the US in order to retain access to this um this very large and rapidly growing consumer market so it gives the US the upper hand and then going to other countries and negotiating and that's how Trump has played it right I mean Trump did negotiate the phase one trade deal with China and so his expectation is that by starting out with tariffs he has leverage he can go and then get better trade deals for the US um but then more broadly if we look at the effects well that can actually be a bad thing because the United States has insufficient savings as a country so we're often importing goods from abroad if we tax those Imports everyone has to pay for that and then meanwhile domestic companies that benefit from reduced foreign competition they get greater pricing power and so we have to pay more for foreign goods and we have to pay more for domestic sort of U racketeering I guess you could say so so in the end that can be harmful for the consumer but what it can do is protect us industry from the ravages of globalization and that's of course uh part of what Trump is trying to do is is secure a floor for this the share of manufacturing in the US economy Harris's plan to fight inflation includes price scouching banss and uh also increasing the housing Supply uh I think it was something about the order of 5 million unit that she tends to build over the coming years um do you think that's going to be effective and bring down inflation those two things combined not really I mean you Harris and price controls know the the countries can use sort of intervention and attempt in certain localities to take the edge off of an acute shortage of housing or something of that nature but generally speaking trying to use price controls is sort of going about it the wrong way you end up disincentivizing the production of the good that you actually want more of and so that's it's an illiberal policy it's one that does not fit with what most mainstream economists would endorse um now I mean and I'm talking about price controls when it comes to housing subsidies I mean you can see that that's sort of a handout that can distort the market but it's not necessarily the end of the world I think in general Harris's economic agenda is one that wants to raise taxes and I don't think she'll be able to do that because one thing we should remember about this election the Republicans are highly likely to win the Senate they're almost certain to win West Virginia and they will probably win at least Montana or Ohio so they'll have control of the Senate and that means she won't be able to raise taxes extensively she also won't be able to increase spending extensively and so she you know this agenda will be using executive decrees uh and then facing push back from the courts so it's it's really not all that likely that her economic agenda will go through and and from the market perspective that may be one positive aspect of a Harris win and I would just caveat that obviously with the if if somehow the Democrats did win full control of Senate and House with her tax hiking agenda that would that would bring a very major fiscal drag into the macroeconomic Outlook and it would be perceived very negatively by markets all right I want to share my screen now and I want to show you uh just a clip from the debate of what Harris said in regards to her plans to stimulate the economy take a listen my plan is to give Are Trump's policies inflationary? a $50,000 tax deduction to Startup small businesses knowing they are part of the backbone of America's economy my opponent on the other hand his plan is to do what he has done before which is to provide a tax cut for billionaires and big corporations which will result in $5 trillion to America's deficit my opponent has a plan that I call the Trump's sales tax which would be a 20% tax on everyday Goods that you rely on to get through the month economists have said that that Trump sales tax would actually result for middle class families in about $4,000 more a year because of his policies and his ideas about what should be the backs of middleclass people paying for tax cuts for billionaires a couple things to un pack here first of all uh is she right is Trump uh is Trump's platform more inflationary overall well it is more inflationary overall yes but that's because so if if you're you know if you're basically if you're expanding the tax cuts that he passed in 2017 you're stimulating the economy now if you also pass a very rigorous border security and immigration control then you're limiting the inflow of foreign workers to the US so you're stimulating the economy you're limiting the amount of Labor that will be available and then the tariffs sort of initially I think would be uh they could deliver a global trade shock which would really not be inflationary but over time when you have those impediments to the supply side of the economy in an import dependent economy then yes that that would cause those consumer prices to move up so in in that way Trump does offer an inflationary cocktail and what it goes back to is the unwillingness to tax uh High income earners or uh or especially corporations and so then you have this widening budget deficit because he's not going to be able to Slack spending um and particularly not on the on the really long-term and mandatory spending you know like Social Security so so the spending cuts that he would be able to do would not offset the tax cuts that he would do you'd have a larger budget deficit and that would be inflationary now her agenda would also be very inflationary particularly the spending but she's offering to raise revenue which would have a an offsetting effect and meanwhile she probably won't be able to do any of it because as I mentioned earlier Republicans will control the Senate she also mentioned that um she Harris's plan to stimulate businesses wants to give a $50,000 uh break to startups uh an incentive I'm not really sure in what form that would come either a grant or a scholarship or or loan I'm not I'm not sure it is it's not clarified but um would that help the economy well you know if if if big companies remember part of the agenda is not only to raise the corporate tax rate to 28% that Harris is is proposing but also uh you know taxing BuyBacks maintaining a minimum tax on book income and then also enforcing tax collection and so all these things combined do raise uh the the the tax burden on major corporations and especially multinationals and so then the criticism is that well you're going to impinge on small business and the competitiveness of the of the business sector um and that's where she's trying to offset that by saying well in fact we will support small businesses and I think she would have of course if she were able to get this through Congress that's an area where she would be able to even get some bipartisan support um assistance for startups and small businesses so um now how much does it help I mean ultimately the cyclical conditions of the economy will be very important there because she may be dealing with a recession as she enters office so this would be a good incentive for small companies but they would have to cope with that recessionary environment first which would be you know very bad for them um but ultimately it it would it would help to Stage a recovery and particularly in that sector but is it sustainable to just have government handouts and to believe that that will fire Innovation and business expansion no ultimately you need in an economy to have uh abundant labor you need to have a clear governing framework uh rule of law and you need to have productivity advancement and what we have in the US are those things and we also have pretty decent demographic profile at least compared to other developed countries so in general there should still continue to be a pretty vibrant uh corporate sector in small business and in Innovation environment during the debate Harris referenced this um pen Wharton Widening deficit study which suggests that the Trump budget proposal would spike the deficit by nearly five times as much as Harris's proposal uh it says here uh the um the federal deficit would increase by $1.2 trillion Under Paris under Trump uh it would go up by five times that much now um she didn't of course mention the fact that under this study uh her her plans would also increase the deficit by $1.2 trillion is just that she stressed that uh the study states that it would be 5.8 under 5.8 trillion under Trump now um do you agree first of all with the notion that either candidate would be uh would would add to the deficit and perhaps even the national debt well well in general yes because if you think about it none of the politicians want to come into office and impose austerity right that would mean shrinking the budget deficit and tightening the belt which would be good from a fiscal point of view it would be great for the bond market um but they don't want to do that because then what happens is you slow down the economy and then when it comes to the next election you're sort of in trouble and I think that would particularly be an issue for Harris because she's a first-term president if she's elected so then she wants to be reelected in four years and so she'll have to be very careful about the pacing of any tax hikes um and and the sort of uh you know the willingness to actually go through with some of her proposals which which are very ambitious but then on Trump Trump's side he's a second-term president so you know he's not as worried about that but the issue there is sort of more ideological he's just been very much a low tax guy he's all about cutting taxes he's actually doubled down on the idea of cutting the corporate rate from 21% to 15% um so he's he's clearly not in the business of of fiscal discipline or consolidation and and he never has been he he's also issued long-term structural reform of entitlement spending let's talk about uh foreign policy now it was uh Gaza was brought up um during the debate and um and uh the War uh in Ukraine was was referenced uh Trump talked about the fact fact that under his leadership there was no major war that he stressed that several times um Foreign policy who do you think would be more stable I guess if you want to use that word uh for the global stage look unfortunately for the world neither the US election is not going to decide the course of geopolitics it has the biggest influence but it's it's not alone going to be the deciding factor and in order to stabilize the world system today we need the US and China to have a a new understanding and a new way of living with each other and that would essentially have two components one no war over Taiwan let's agree to disagree but not have a war on Taiwan and the other part of it would be let's not attack each other's economies if if we're imposing punitive measures on each other's economies then we can destabilize each other's economies which threatens the regime's uh political uh you know survival and makes them very erratic very aggressive with each other and so that can be destabilizing for the world so you need to have that us China agreement and then also of course you need to have a US Russia agreement to uh to essentially neutralize Ukraine not allow Ukraine to join NATO and then have Russia uh pull back and stop invading other countries and so um now how do we get to that well the NAT 75th Anniversary the decision was made to continue to push for Ukraine to join NATO so that's not on the on the uh offering from the Western countries and Russia will therefore continue to prosecute the war very aggressively and and so if you look at what happens if Trump wins the election he's going to continue some unilateral policies that could be highly destabilizing especially when it comes to trade and especially when it comes to China when we talk about Harris winning first of all she's going to have a massive Showdown with Russia almost immediately as a result of the of the refusal to back down on Ukraine um but then also ultimately later on she will too have a problem with China um having to do with attempting to control their access to high technology imposing export controls and and in EN forcing us allies and partners to enforce those same controls that constrains China's economy so we're looking at a really Rocky geopolitical environment under either candidate Trump would be willing to negotiate a ceasefire on Ukraine but he'd really escalate Global instability both in trade and in confronting Iran and and heating things up in the Middle East Harris would not she'd have the escalation going on in Ukraine she might negotiate with Iran uh but but both of them would have a problem with China let's take a look one more time on my screen uh this is Trump's um he comments on sanctions and his approach to dealing with Iran they a listen in her own way she hates the Arab population because the whole place is going to get blown up Arabs Jewish people Israel Israel will be gone it would have never happened Iran was broke under Donald Trump now Iran has $300 billion because they took off all the sanctions that I had Iran had no money for Hamas or Hezbollah or any of the 28 different uh spheres of Terror and they are spheres of Terror horrible Terror they had no money it was a big story and you know it you covered it very well actually they had no money for Terror they were broke now they're a rich Nation so he's basically saying that sanctions work do they work well he he's not wrong about the fact that the the US was imposing sanctions on oil and enforcing them and therefore Iran was starved of cash and Iran was of course also lashing out and we had a higher risk of oil supply disruptions under his administration even though he didn't want to have a war with Iran we were driving in the direction of a major conflict and I think he would resume that because L what he'll do is he'll say and it's not just Trump by the way this has been the Republican Party policy is we'll enforce these sanctions we'll isolate Iran and we will tell them that they need to freeze their nuclear program and that's the end of the discussion and if they continue to pursue nuclear weapons then we'll conduct air strikes in fact John McCain in the 2008 election was singing bomb Iran you know so this has been a republican policy of of giving an ultimatum and stopping them from getting a nuclear weapon and being shoulder-to-shoulder with Israel on that issue and if Trump wins I think that will continue to be the policy and I think it will increase the odds of conflict in the region now for the yeah go ahead earlier in the summer we talked about the probability of an outright War breaking out between Israel and Iran and you had a float chart um people can Israel-Iran conflict revisit that interview I'll put the link down below has your have your odds shifted there for that no odds have not changed there and what that what that showed was that we were very likely to have an escalation with with Hezbollah in Lebanon and we did ultimately you know um Israel attacked Hezbollah preemptively and there's still a lot of heat there and it can continue to flare um but what it also showed is that we had a major risk that the Israeli Iranian tensions would would blow up and we would end up with Iraq or uh the Persian Gulf for certain areas seeing oil shocks now that part has not that was not our base case but it was a high risk we gave it a one-third probability um now th those odds uh will go up after the US election because after the election President Biden can roll up his sleeves and he can go to Iran and say Hey listen I tried to negotiate with you I didn't enforce the sanctions I negotiated a prisoner swap with you and enabled you to get access to some of your Frozen funds around the world and what did you do you went and attacked Israel through your proxy groups and you attacked international shipping and that's got to stop so Biden can do that initially whether Harris or Trump wins and then uh Harris will have to issue is shot across the bow I'm willing to negotiate but you're going to have to play by the rules and meanwhile Trump like I said will probably pursue maximum pressure so I definitely think that after the election we'll see a a a a bigger risk of conflict with Iran now depending on the outcome Democrats will probably lead us down the path of more negotiations uh but we should definitely be aware of this risk because uh well let's just think about it this way oil price is falling because recession odds are going up and that can continue until a recession is priced but when you get on the other side if we have a destabilization in the Middle East because Iran is pursuing a nuclear weapon then we will ultimately have relevant oil supply constraints okay let's finish up on the markets then um right after the uh debate on Tuesday Wednesday morning markets uh stock markets briefly fell um partly also on the back of slightly uh weaker than expected CPI report and then it rallied again anyway my point is do you think that Harris win uh should she win would be bearish for markets as some pundits have speculated it would be primarily due to her tax policies not really one Election and markets thing is the stock market normally rallies after the election regardless it's just a removal of uncertainty now in this case the election could be so close and we have swing States maybe doing recounts or or uh litigation so we may not have a solid answer until the Electoral College votes in mid December right so there's plenty of room for volatility short term and we may not have an immediate answer that we need uh but once we know the result of the election then Harris is bearish if if Democrats win full control now to be clear for a party to win a full sweep like they did in 2020 and then lose it like they did in 2022 and then reclaim it that's a very rare event that's the last the only time I know of that that happened in modern memory is in 1948 so um so Democrats should not be in full control they're likely to lose seats in the Senate and probably Republicans will retain the house and that's because people are upset with inflation and the rising joblessness in certain States so I don't think she'll win a full sweep I don't think Democrats will do that and that but that would be the bearish outcome because that's where then you would see that corporate tax rate go up and and you would immediately have to adjust for corporate earnings and that would be a downgrade of corporate earnings and the market would have to Discount that what is your base case then for for the the S&P 500 by the end of the year oh well in in my view the S&P is going to fall I don't I don't give a I'm I'm a geopolitical strategist right I don't give a number for that but I think that we can see it fall below 4,000 and the reason is because this this pattern of falling job openings and uh and Rising unemployment this leads ultimately to a recession you don't normally have cases where the unemployment rate starts rising to the extent that it has and then it just flatlines and goes back down that never happened happens and when the FED starts cutting interest rates it doesn't prevent recessions well they're cutting interest rates because the labor Market's cooling because the economy is slowing down so they won't be able to stop that recessionary uh process and that's what's going to bring uh that's what's going to bring the earnings expectations down and the multiples down in the stock market excellent appreciate your thoughts thank you for your Matt where can we learn uh from your work BCA research we've been doing it since 1949 all right excellent I'll put the link down below people should check out CCA research uh appreciate it once again I hope to speak with you soon and closer to the election I'm sure there's more news so thanks for coming on thank you David thank you for watching don't forget to like And subscribe