THE BLOG

Epic Battle for the Soul of America and the World

03/03/2016 11:39 GMT | Updated 04/03/2017 10:12 GMT

The Trump Train Thunders On

On Super Tuesday Donald Trump (69) and Hillary Clinton (68) have proved themselves the undisputed front-runners in presidential election race.

Trump has risen above regional and ideological divisions that have shaped the Republican Party in recent years. His momentum is not fading. The Trump is on a roll and the GOP establishment is getting more nervous by the hour.

On the other side of the isle, it seems very unlikely that Clinton will not be the Democratic nominee. Some pollsters even give a 100% chance of Hillary ending up with the nomination and most pollsters are 90% sure.

Pollsters are still not completely sure about Trump's chances, but most do not see much that can derail Trump and they give him a 60% chance of ending up vying for the White House with Clinton. It may not yet be time to coronate Trump, but he is certainly the crown prince.

A Super Tuesday history lesson

History has been kind to Super Tuesday victors when it comes to taking the eventual nomination for their parties. The modern-day Super Tuesday was born in 1988, when a Southern states on the Democratic side, upset with the nomination of Walter Mondale four years earlier and frustrated with being out of power for two decades except for one term, banded together to try to nominate someone more moderate. The plan ended up backfiring as three candidates split the delegates available that day.

However, apart from that disastrous first Super Tuesday for Democrats, the big contest has a perfect track record since then in choosing Republican and Democratic candidates. We can go even further: ever since 1988, Super Tuesday all but wrapped up the nomination for most candidates.

Survival Strategy

For now, the only thing the other GOP candidates can do to stop Trump is to go in the survival modus: do not bet on defeating Trump outright, but hang on until the Republican convention in July. Blocking Trump should be the priority now, and hope that at a brokered convention, enough delegates will band together to nominate a more electable, 'moderate' candidate.

Whether this strategy can work, could become clear within less than two weeks when both Rubio's and John Kasich's respective home states are up for grabs: Florida and Ohio. According to Nate Silver's FiveThirtyEight blog Trump has a 68% chance of taking Forida; Rubio stands at just 31%. Ohio seems like a closer race: with Trump at 39% and Kasich having a 41% chance of taking the state. If Trump wins both states, his nomination looks inevitable.

Clinton would be pretty happy with a Trump nomination, as he would be "worst general-election candidates in history ... and oh, yeah, he's starting a civil war in his own party," said a senior Clinton aide to Politico.

The American & Global Soul At Stake?

Assuming we will witness a Clinton-Trump fight in November, these two are the personification of two parties running in radically divergent directions. As Politico journalist Glenn Thrush wrote: "The Democrats' top priority in coalescing behind Hillary Clinton: running the country. The GOP's top priority: venting rage at how the country is being run."

An analyst at CNN went so far as to call a Trump-Clinton match an epic battle for the soul of the nation. Of course, this sounds like the typical American over-the-top drama. However, a Trump presidency could put even more at stake than the soul of the world's most powerful nation. The foundations of the liberal world order could also be dealt painful blows as Trump's core ideas - according to Brookings scholar Thomas Wright - on foreign policy are worrying to those who want to preserve this US-led liberal order:

  1. Sympathy for decisive authoritarians (Trump has complimented and defended Russian leader Putin numerous times).
  2. The belief that an open global economy creates more problems than benefits for America.
  3. The belief that the US places too much emphasis on overseas military alliances (he has questioned the alliances with Japan and South Korea).

Although US presidential elections usually do not impact the financial markets very much, the markets could get nervous as the chances of a Trump White House increase. Trump would not just take decisions that would hamper trade or antagonize important countries - former Mexican presidents already compared Trump to Hitler - he could undermine the whole global order if given a free hand. Fortunately the checks and balances in the US political system would act to keep Trump from acting too rashly, but those could not prevent each and every try by Trump to act on his campaign promises.

Trump may be no Hitler, but.....

Even the eminent economist and Financial Times columnist Martin Wolf could not help but evoke Hitler when writing about Trump: "It is not difficult for a determined leader to do the previously unthinkable by appealing to conditions of emergency....What made [Hitler] so destructive was not only that he was a paranoid lunatic, but that he ruled a great power. Trump may be no Hitler. But the US is also no Weimar Germany. It is a vastly more important country even than that."

Most analysts are still convinced that Clinton would defeat Trump in November and we do agree. However, we are also aware of the limitations of predicting US politics. Three months ago, Nate Silver - the semi-god of predictions and polls - said that Trump had a 2% chance of taking the Republican nomination....

The one things that seems sure is that the 2016 election is an event that for the first time in many years could have a big impact on the financial markets. If Trump would win, chances are that he would worsen the already dismal historic record of the S&P 500 in post-election years: Ned Davis Research shows that since 1900, stocks have gained just 3.4% on average in the post-election year, compared with gains of 4.0% in the midterm year, 11.3% in the pre-election year and 9.5% in an election year.