UK Asset Manager LGIM Ditches 'Trump Trade' As Biden's Exit Changes Voter Turnout Prospects For Democrat's Side

Legal & General Investment Management (LGIM), the U.K.’s largest asset manager, has decided to abandon its bet on the steepening of the Treasury curve. This decision comes in the wake of President Joe Biden‘s unexpected withdrawal from the U.S. election race.

What Happened: Christopher Jeffery, head of macro asset allocation at LGIM, expressed that the chances of a clean sweep by Donald Trump and his party in the House of Representatives and the Senate have decreased. This speculation had led investors to believe that such an outcome would trigger inflation and worsen U.S. finances, pushing longer-dated yields higher, Bloomberg reported on Thursday.

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“We took off our steepening exposure because we thought Biden dropping out would stop the momentum that has been building behind a Republican clean sweep,” Jeffery explained. LGIM manages approximately $1.5 trillion in assets.

Vice President Kamala Harris Harris’s rise potentially sets the stage for a closer contest in November. A divided government would make it more difficult to implement significant policy changes.

Jeffery added, “It's unclear to what extent it effects the presidential outcome but it does change the prospect for voter turnout on the Democrat side.”

Why It Matters: With Harris gaining support among Democrats, markets are now reassessing the “Trump trades,” which are primarily based on his plans for tax cuts and higher tariffs. Despite this, the Treasury curve steepened again on Wednesday, driven by commentary from Federal Reserve officials and weak economic data, which sparked speculation on interest-rate cuts.

A new election poll shows a close head-to-head battle between Harris and Trump, with 65% of Democrats also said that Biden stepping down increases the party’s chances of winning the 2024 election.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari