Crypto News: Harris puts Democrats back in race

Welcome to the Year of the Elections, Bloomberg's newsletter on the votes that matter to markets, business, and policy amid the most fragmented geo-economic landscape in decades.

The result of one of the most frenetic two months in US political history is a race — and nation — transformed.

The political landscape was capsized by Joe Biden's disastrous debate performance, a shocking assassination attempt on rival Republican presidential nominee Donald Trump, and the president's subsequent decision — as he was isolating with Covid — to drop out of the race and endorse his vice president, Kamala Harris.

Harris at a campaign event in Arizona this month. Photographer: Rebecca Noble/Bloomberg

There's a palpable excitement gathering behind the Democratic nominee, who has quickly rallied not only her party but also voters dispirited by their original choice between two well-trodden geriatric candidates. The Democrat has opened a small but steady lead in public opinion polls, turning around a race that seemed unwinnable for her party just weeks ago.

Harris can expect a boost from the Democratic convention next week in Chicago, where three presidents — Biden, Barack Obama and Bill Clinton — will fête her alongside some of the party's rising stars.

But she needs to navigate some important challenges across the three-month sprint until Election Day and identify areas where she'll break from her boss.

That's particularly important on the economy. Voters remain skeptical of Democratic leadership thanks to spiking post-pandemic inflation that only lately cooled. Recent market instability has only underscored the fragility of the recovery. Rising unemployment and discouraging sales data could prove the harbingers of a dreaded recession.

Trump in the meantime is still adjusting to a new opponent.

He stumbled through some high-profile events — including an appearance at a conference for Black journalists where he questioned Harris' ethnicity, and a live broadcast with Elon Musk marred by technical glitches.

And while that has reminded voters of the chaotic lows of his presidency, his base remains as fervent as ever. He's trying out different nicknames on her (none are sticking) when hammering away at inflation and cost of living would be more effective.

After the convention in Chicago, Harris will need to avoid the type of pitfalls that doomed her first presidential campaign. She has pledged to sit for at least one interview before attention shifts rapidly to her Sept. 10 debate with Trump.

On that stage is where the stakes are highest. Trump is looking to land a second knockout blow. She needs to appear calm and in control, and to keep needling a thin-skinned rival already chafing at being called "weird."

And to add even more drama to the moment, the two have never met. America and the world will be tuning in. — Justin Sink

Trump during a news conference yesterday. Photographer: Bing Guan/Bloomberg

Anna Wong, the chief US economist for Bloomberg Economics, explains the challenges ahead.

What will the economy look like on Election Day?

US growth is set to cool in the months ahead of the presidential vote. GDP expanded at a robust 2.8% pace in the second quarter — but behind that was a buildup in inventories which we expect to unwind and drag on output in the second half. Cautious consumers are another headwind. We expect spending to decelerate amid rising unemployment and uncertainty about the future. The demand pullback will feed into lower hiring, and ultimately an increase in layoffs. We expect the unemployment rate to reach 4.5% in the fall, possibly by October.

Will the Fed cut rates, and would that help Harris?

We see the Fed cutting policy rates by 50 basis points in September, followed by quarter-point cuts at each of the following two meetings, for a total of 100 bps in rate reductions this year. Inflation — which Harris will hope is less of a negative for her than it was for Biden — is heading back toward the Fed's 2% target, but we don't think it will be there ahead of the vote. All in all, we expect slowing growth, rising unemployment, and the memory of high inflation to be a modest headwind for the Harris campaign.

Ye Xie, a Bloomberg Emerging Market reporter, gives his view on how investors are gaming out one of the most unpredictable elections in recent history.

Following Biden's poor debate performance in late June, wagers on a stronger dollar and weaker long-term Treasuries quickly became the consensus "Trump trades." The former president's support for looser fiscal policy, steep tariffs and crackdown on immigration are generally viewed as likely to benefit the US currency and cause longer-term government bonds to underperform shorter-maturity notes.

But the surging popularity of Harris and soaring odds the Federal Reserve will soon start cutting interest rates threw some of the bets off track. The Bloomberg Dollar Index has lost about 3% since the end of June as signs of a slowing economy prompted investors to bet more than 100 basis points of interest rate cuts by year-end.

While longer-term Treasuries did underperform, it's not because investors are increasingly worried about fiscal deficit and inflation under Trump. The so-called term-premium — or the extra yields investors demand for holding long bonds — remains quite steady. Rather, it's driven by the Fed's easing expectations, which benefited short-term bonds more than 10-year or 30-year bonds.

It's a reminder that for markets, economic data and monetary policy are more important than politics, at least in the short-term.

One thing is for sure: Investors are bracing for more volatility heading into the election. The futures contract of the VIX Index — known as the Fear Gauge — showed stock investors are paying a premium to hedge against wilder stock moves in October.

Dana Hull, who covers Tesla, SpaceX and Elon Musk for Bloomberg, gives her take on how corporate America is split.

So where do America's corporate titans stand on the election?

Musk, the CEO of Tesla and SpaceX, has emerged as one of Trump's most vocal supporters in the 2024 presidential campaign. His America PAC is spending money to get Trump elected, and he hosted the former president for more than two hours on X, the social-media platform he owns, Monday night.

Trump acknowledges Musk after the successful launch of the SpaceX Falcon 9 rocket back in 2020. Photographer: Saul Martinez/Getty Images North America

But many CEOs are sitting on the sidelines — at least for now. Jamie Dimon, the CEO of JPMorgan Chase, outlined leadership skills the next president should have in a Washington Post op-ed but has not endorsed a candidate. Trump told Bloomberg in late June he would consider Dimon as a possible treasury secretary.

Trump's other supporters include Kelcy Warren, the chairman of Energy Transfer Partners, John Catsimatidis of Red Apple Group and Steve Schwartzman, chairman and CEO of Blackstone.

Harris has drawn support from venture capitalists like Reid Hoffman, Sam Altman of OpenAI, and Netflix co-founder Reed Hastings.

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