There are all kinds of rumors about Donald Trump's corona infection. For example, the disease is brought into connection with election campaign tactics - from the search for sympathy to the attempt to postpone the election date. But this is only one side of the coin. Trump is proud of what he claims to have achieved for the US economy: Certainly, the 2017 corporate tax reform passed by Congress has created jobs and investment incentives in the United States. The USA has also become more attractive as a business location for German companies, partly because they are not subject to import duties that could be imposed during a trade war.
When the large US domestic market booms, everyone benefits, especially German exporters and companies with direct investments in the USA. From the perspective of German companies, the uncertainty about the outcome of the election, which we mentioned in our last blog after the television debate, is now being tightened up by the uncertainty about when the election will take place and who will be running for the Republican Party. It is therefore not surprising that at the end of last week, stock market prices fell by more than 1% in the short term in response to news of the infection.
A renewed slump on the large US domestic market due to the uncertainties surrounding the US presidential election would counteract the positive effects of the strong increase in M&A transactions seen in the just completed 3rd quarter of 2020. This growth concerns in particular strategic mergers of listed companies and investments by private equity funds. With a 15% share of the total M&A market, these have reached the highest level since the boom in leveraged buyouts in 2007 before the outbreak of the financial crisis. With its broad impact on global markets, this dynamic has also had a positive impact on German companies with strong exports. For example, statistics show a significant increase in direct investments by German companies in the US since the corona stagnation of spring 2020. Similar developments are expected for US companies, especially since investments previously directed to China can also be redirected to Germany. Of course, this only applies to the extent that the regional focus of the investment is not the primary concern.