US election season heats up as Clinton and Trump clash in the first debate

Tuesday presented us with the first US presidential debate between the two major party candidates. Donald Trump, the Republican candidate, clashed with Hillary Clinton, the Democratic candidate over issues such as emails, race relations, business success, and the economy. Notably absent were the minor party candidates, such as the Green’s Jill Stein, and the Libertarian party’s Gary Johnson.

Financial markets responded positively to the debate, with US futures rising over 100 points from just before the debate to soon after. Some have interpreted this to mean that Hillary is the perceived victor, due to a widely held perception that she is the favoured candidate amongst financial market participants.

Another litmus test for the debate was the price of the Mexican Peso, with a Trump presidency possibly to the detriment of the United States’ southern neighbour. During the debate, the Mexican Peso strengthened by over one percent against the US dollar, indicating currency traders believe that the debate has strengthened Mrs Clinton’s prospects.

Donald Trump singled out the US Federal Treasury Reserve, stating that interest rates were too high, and that the Fed’s decisions are politically driven. This is likely to cause some friction between the Fed and Mr Trump, were he to be elected.

When pressed to release his income tax returns, Mr Trump stated that he would release them after his audit from the IRS was complete. He also challenged Mrs Clinton to release the more than 30,000 emails, which were deleted from her private email server, stating that he would release his tax returns, if Mrs Clinton released her emails. Mr Trump indicated that there were years in which he paid no Federal income tax, which he stated makes him “smart”.

Many commentators have lambasted Mr Trump for this comment. However, tax avoidance (rather than evasion) is actually encouraged by the IRS, with their website stating, “Tax avoidance is perfectly legal and encouraged by the IRS”.

Mr Trump trumpeted his tax cut policy, stating his belief that it would allow US based multinationals to repatriate profits from their overseas subsidiaries. However, the Tax Policy Center, an independent think tank, has stated “The plan would reduce federal revenues by $9.5 trillion over its first decade” and that “unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036”.

Mr Trump also attacked the debt accumulation of Barack Obama’s presidential tenure, stating that he has double US government debt, accumulating as much debt as the entirety of US presidents before him combined.

Mrs Clinton was pressed on her state department emails, which were routed to a private email server; something which is against US government rules, and which she had been warned against. A large amount of the emails have been leaked to the public, after their acquisition by the FBI. However, more that 30,000 of the emails were deleted, and remain unreleased. Mrs Clinton apologised for her choice of email server, but did not indicate she would release the emails, which are apparently recoverable.

Mrs Clinton also attacked Mr Trump’s tax cut proposals, stating “Slashing taxes on the wealthy hasn’t worked. And a lot of really smart, wealthy people know that.” She states that she is proposing to raise taxes on high wealth households in to ensure that they pay their “fair share”.

Regardless of the outcome of the election, this campaign is already starting to contribute to the movements of financial markets, and will likely continue to do so from here. Watch for more volatility around the upcoming debates, as well as major polls and other news items.