US politics: the makings of a perfect storm
Matt Miller
Political Economist
  • The US has all the makings of a perfect storm with growing racial unrest, COVID-19 and the upcoming presidential election 
  • Don’t put much faith in the US presidential election polls now – four-plus months is a lifetime in politics; we can expect endless cycles of change before the vote 
  • Keep your eyes on the fight for the Senate – even if Joe Biden wins, with a Republican Senate most ambitious Democratic measures would be non-starters

What are your thoughts about the growing racial unrest in the US? 

The political climate is changing in the US and the scenes we are witnessing across many US cities have been striking on many dimensions. On the one hand, there has been a heightened focus on the racial injustice that exists in our society and we are seeing people of all races take to the streets to support the Black Lives Matter movement. On the other hand, some of the protests did turn violent and there was even looting in some cities, which has raised concerns surrounding law and order. It is hard to say where this entire situation surrounding racial unrest in the US is heading but it does add to the complexity in today’s environment because we are still in the midst of the COVID-19 pandemic and with a presidential election later in the year. 

From an investment perspective, apart from the initial drop at the start of the demonstrations, US equities have fared reasonably well. What that probably means is investors are viewing the fallout from the racial unrest as an acute event that is unlikely to cause long-term disruption to the economy or corporate earnings. 


What is your take on how the US administration has been handling the COVID19 pandemic?

This is obviously an epic crisis for the world. And in the US, the impact of the pandemic has been strangely divisive, in large part because of the polarisation of US politics today and the communication style of the current American president. Normally in times of crisis there’s a rallying around a leader and sense of common purpose. But while President Trump enjoyed a boost at the beginning of the crisis, as the depth and seriousness of the public health and economic calamity that was facing the US became clear, the president’s own divisive style, and the widespread concern that the earliest phases of the outbreak had been mishandled, created a very polarised climate. 

Some might argue that, in the debate about reopening the economy and getting people back to work, the president has attempted to stoke the partisan division between the so-called red and blue states1 in the US – and with the US presidential election only a couple of months away.


What do you think is the likelihood of Donald Trump’s re-election? 

Before the COVID-19 pandemic, in raw political terms in the US, Trump was set up for a classic re-election campaign where he was going to focus on prosperity – for example, strong US stock market returns and the lowest level of unemployment in 50 years – as well as highlight relative peace along with claims to have successfully eliminated prominent terrorist leaders. He had a clear narrative of what he wanted to say.

Trump has been forced by the crisis to abandon this narrative and instead rebooted himself as a ‘wartime’ leader. His attempt to reboot has in some ways been hampered by his unusual traits. The scale of this crisis has highlighted social divisions and a lack of empathy, rather than bringing the country together. Trump’s current position might be characterised as that of a divisive ‘wartime’ leader, which is an oxymoron.


1. Red states and blue states refer to states of the United States whose voters predominantly choose either the Republican Party (red) or Democratic Party (blue) presidential candidates.

Matt Miller is a political economist at Capital Group. He was formerly a senior advisor at McKinsey, a Washington Post columnist and author, host of public radio's "Left, Right & Center" program, and a Clinton White House aide. He has a law degree from Columbia and a bachelor's from Brown.

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