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The VP debate is consequential amid COVID-19 and the presidential candidates’ old age. While Harris may win on health, prosecuting the calm VP on the economy and race relations will likely end with a win for Pence, narrowing Biden’s large lead against Trump and adding to uncertainty which markets dislike, FXStreet’s analyst Yohay Elam reports.

Key quotes

“Harris will likely criticize Trump’s administration’s mishandling of coronavirus. Pence heads the task force for the disease, making it easier to tie him to his boss. Democrats enjoyed a ‘blue wave’ – or sweeping victory – in the 2018 mid-term House elections by focusing on healthcare – and Harris has an even stronger case as millions are losing their insurance alongside their jobs. Unless Pence surprises with a GOP plan, he would likely lose the topic on both the mounting death toll from COVID-19 and a lack of any health care program.”

“Pence may be able to distance himself from his boss and paint a rosier picture of a recovering economy, especially given the public perception and signs of recovery.” 

“Pence is a calm debater and has not been caught making demeaning remarks. By just being nice to a woman of mixed race – he would already be far better than Trump. In turn, that would earn him points with Republicans who are reluctant to vote for the inflammatory president. The doubts that some right-wing members have raised over Harris’ eligibility to run – echoing the racist Birtherism movement Trump championed against Obama – will likely be unequivocally disavowed by Pence. The bar is low the VP against his challenger on that field.”

“Investors tend to prefer Republican presidents – not on economic stewardship, but on business-friendliness such as tax cuts. However, with the country and the world still reeling from the virus, markets want a clear result and more stimulus. Recent surveys raised the chances of a landslide Democratic sweep – full control of all levers of power that would allow for spending. If Pence succeeds in narrowing the gap, investors could wind down such expectations. A retreat in stocks would be accompanied by an increase in the US dollar.”

“In the unlikely scenario that Harris overwhelms Pence – or that the debate is canceled altogether – equities would have room to rise and the dollar could fall.”