Get Up Mr President!

On that evening in Butler, Pennsylvania, the air hung heavy, thick with the weight of unsaid words. The crimson sky stretched wide, a silent witness to the tension simmering above thousands of expectant faces, all waiting with bated breath for former President Donald Trump's speech. The chants of "Make America Great Again!" reverberated through the air, amplifying the fervor and raw emotion of the event. Amidst the sea of eager faces, hope and ambition merged into one, their voices blending into a thunderous roar. Yet, on the fringes of this jubilant crowd, a shadowy figure stood poised, ready to alter the course of history.

With steely resolve and an icy glare, Thomas Matthew Crooks lifted his AR-15 rifle. In a heartbeat, the vibrant scene, once brimming with color and life, morphed into a nightmarish vision of darkness. The deafening blast shattered the jubilant cheers, transforming them into screams, and with that, a new, ominous chapter of the story unfolded.

"Fight, fight, fight!" – Donald Trump
He shouted three times, pumping his fist in the air.

This shocking event wove a dramatic thread through the narrative of the U.S. presidential election, as if straight out of an action movie. The ripple effects of this incident didn't just shift the election's trajectory; they spilled over into other realms. One such domain was the stock market, ever sensitive to seismic events.

The stock market, with its volatile and unpredictable nature, reacted sharply to every twist and turn. Investors, from the smallest to the largest, monitored each move and word from the candidates with intense scrutiny, especially in the wake of the assassination attempt on Donald Trump, the leading presidential candidate for the upcoming term.

In a similar vein, this situation brings to mind the House of Cards series, where political intrigue and strategic maneuvering dominate. Just as Frank Underwood in the series adeptly manipulated situations to strengthen his power and sideline his adversaries, this momentum could serve as a crucial strategic tool. It offers a chance to enhance one’s public image, boost electoral appeal, and outmaneuver rivals with the precision and foresight of a chess game, shaping the political landscape with each calculated move.

Shoot the shot

The attempted assassination of Donald Trump sent shockwaves through the US stock market. It is undeniable that after the assassination attempt, uncertainty about market risks in the United States also played a role. One way to measure the level of "fear" in the market is through the Volatility Index (VIX), which shows market expectations about future stock price fluctuations. An increase in the VIX value reflects high investor uncertainty and concern, which illustrates the impact of major events on financial market stability.

Graph 1. Volatility Index after Trump get shoot. Source: Market Watch, 2024

 

After the assassination attempt, it rose about 4% to 12.96 on Monday morning ahead of the US stock market opening week, at 8.45 am (Market Watch, 2024).  The 4% rise in VIX reflects that the market sees this event as something that has the potential to add to political and economic uncertainty. In other words, the rise in VIX is a signal that market risk has increased in response to these events. This incident, it is predicted, will make investors likely to turn to safe-haven assets such as the US dollar, Swiss franc, gold, and Bitcoin, which are seen as an escape from political uncertainty.

However, the real impact did not unfold as expected. The shockwave from the assassination attempt intensified, but the initial reaction was overwhelmingly positive. Observers were caught off guard by an unexpected reversal: the Dow Jones Industrial Average surged 211 points, or 0.5%, closing at a record high. This spike followed the recent upward trend in inflation data, which had already fostered a sense of optimism. Similarly, the S&P 500 rose 0.3%, and the Nasdaq Composite gained 0.4% (CNN, 2024). This wave of momentum suggests biased investor behavior, such as overconfidence and the endowment effect, where they perceive the assassination attempt as a "breath of fresh air" due to their expectations of Donald Trump’s victory.

Graph 2. Stock Market Growth in Donald Trump Regime. Source: BBC, 2020

Investor bias is closely linked to the stock market performance during Donald Trump's presidency. Overall, the Dow Jones Index saw a remarkable surge during Trump's tenure from 2016 to 2020, surpassing the performance of the preceding years. In fact, when Donald Trump was elected president in 2016, the Dow Jones Industrial Average hit an unprecedented all-time high.

The Electability

Given its intriguing nature, could it be true that investors expect the assassination attempt on Donald Trump to actually boost his electability in the upcoming election and fortify the position of the Republican Party that backs him? A binary method approach can be employed to analyze the decisions made by both Donald Trump and the Republicans, where each has two choices. This method examines how their choices influence each other and determines the most advantageous strategy for both parties.

As a result of these events, we can see how Donald Trump as the presidential candidate of the United States, and the Republican Party as the supporting party, might react. Presidential candidate Donald Trump has two options, first to continue his campaign more aggressively, trying to gain sympathy by saying that he is a victim. The second is to change his approach, becoming more moderate or calm, to avoid another assassination attempt, and political stability, in this case a security issue. The Republican Party, as the supporting party, has two options, first, continue to fully support Trump. Second, distancing themselves from Trump and possibly choosing another safer candidate to avoid another assassination attempt and stabilize political dynamics.

Table 1. Payoff Matrix Binary Methods Republic Party and Donald Trumps React’s

In binary game theory, we classify the outcomes of players' decisions using 1s and 0s. A “1” is assigned when a player's strategy successfully achieves their goal, while a “0” is given when the strategy fails to reach the desired outcome. In table 2, the equilibrium, or Nash equilibrium, is reached when presidential candidate Donald Trump maintains his aggressive campaign tactics while the Republican Party continues to steadfastly support his actions. This equilibrium represents the most stable outcome, as both parties achieve their optimal results by adhering to this strategy. For Donald Trump, this presents a prime opportunity to leverage his post-assassination strategy to expand his supporter base.

Graph 2. Favorability rating of Donald Trump vs Nikki Haley. Source: Statista, 2024

The Nash equilibrium strategy proves to be politically sound, especially since Trump’s rival in the Republican Party, Nikki Haley, has faced difficulties with internal party electability. As of March 2024, Donald Trump’s popularity among American voters remains higher than Nikki Haley’s (Statista, 2024). Consequently, replacing Trump with another candidate could pose significant risks for the Republican Party because Donald Trump has bigger electability than Nikki Haley. In political systems where the support of the voter base is critical, changing candidates can result in a significant loss of support, especially if voters feel that the replacement candidate does not have the same appeal. If Donald Trump is replaced with Nikki Haley, the Republican Party will lose the voter’s.

In addition to the strategic maneuvers of Trump and his party, the strategies employed by the Democratic Party and the responses of American voters are crucial factors shaping the electoral landscape. These dynamics will undoubtedly play a significant role in determining the outcome of the 2024 U.S. presidential election. Swing voters are faced with two choices, firstly After the attempted shooting, some swing voters may feel sympathy for Trump. They may think that he is a victim and that the attacks against him are unfair. This could make them more likely to support Trump. Second, there are also swing voters who may feel that the instability and polarization brought by Trump is too dangerous. They could be worried that supporting Trump means supporting more chaos and risk in the future, so they might turn to other more moderate candidates. The democratic party also have two options. Firstly, the Democratic Party has the option to attack Presidential Candidate Donald Trump by framing and polarizing the assassination attempt. However, this approach is risky as it could lead to losing swing voters and median voters across the United States who are wary of extreme and radical tactics. Second, the Democratic Party could choose to be more moderate, by condemning acts of attack, and empathizing with the attempted assassination of presidential candidate Donald Trump. This will provide an advantage for the Democratic party to gain sympathy from swing voters and median voters.

Table 2. Payoff Matrix Binary Methods Democratic Party and Swing Voters

Based on the analysis of the payoff matrix in binary game theory, it would be more strategic for the Democrats to focus on other issues, as swing voters are likely to distance themselves from Trump and lean toward the Democratic ticket. This approach can help avoid a boomerang effect, where swing voters might otherwise sympathize with Donald Trump. Moderate voters (median voters) tend to prefer a regime that offers more stable and secure policy decisions.

Graph 3. 2024 presidential election polling of Kamala Harris vs. Donald Trump between July and August 2024 in the United States. Source: Statista

On the other hand, appointing Kamala Harris as the Democratic nominee is the best option for the party. There was an increase in electability obtained by Kamala Harris after Joe Biden's resignation as the 2024 US presidential candidate carried by the Democratic Party (Statista, 2024). This aligns with the previous analysis using the binary method of game theory. Attacking Donald Trump could negatively impact the Democrats' electability, causing them to lose swing voters and median voters across the United States. Nominating Kamala Harris as the Democratic candidate for the U.S. presidency positions her as a strong contender against Donald Trump. As a Black woman of South Asian descent, Harris has the potential to captivate progressive voters and minorities who may have previously felt underrepresented. In addition, Kamala Harris is not concentrating on attacking Donald Trump in relation to the assassination attempt. Instead, she emphasizes a rejection of political violence and strives to demonstrate constructive leadership, focusing attention on her presidential vision, such as building the middle class and protecting abortion rights, even though specific details remain limited (WPRI, 2024).

Make America Great Again

The electability of Republican presidential candidate Donald Trump is undeniably influenced by the assassination attempt during his campaign. The incident had a significant positive impact, and Donald Trump successfully leveraged it to boost his electability. He is portrayed as a steadfast and courageous leader, enhancing his appeal to the public. However, this event has sparked a “plot hole” that has evolved into a theoretical analysis among political observers. Much like the Marvel Universe series "WHAT IF," it raises the question: what if Donald Trump had not been targeted in the assassination attempt?

Before the incident, Trump’s electability was already strong compared to the Democratic incumbent, and the possibility of appointing Kamala Harris was never on the table. Trump enjoyed robust support in key battleground states like Arizona, Georgia, Michigan, Pennsylvania, and Wisconsin, often leading Biden by several percentage points in various polls (Politico, 2024). Moreover, Trump’s rising electability since 2016 has been driven in part by dissatisfaction with the economic policies of the Biden era, which many argue have weakened America’s economic hegemony. Biden's administration, through initiatives such as the $1.9 trillion American Rescue Plan (NPR, 2021), has faced criticism for potentially overheating the economy.

Trump’s potential re-election could have significant repercussions for the U.S. economy. His aggressive campaign, backed by unwavering support from the Republican Party, could lead to policies that favor deregulation, tax cuts, and a tough stance on international trade.  A 10% trade tariff policy applied universally would introduce significant uncertainty into international trade. Reflecting on the years 2018-2019, this uncertainty led to a 2% decline in industrial production in Europe. This drop occurred as companies potentially postponed investments or expansions due to the unpredictability surrounding tariffs and trade policies (CNBC, 2024). Moreover, there would be spillover effects from the domestic tax cuts proposed by presidential candidate Donald Trump. Besides providing incentives for domestic growth, this policy would also attract investment from other countries into the United States, particularly from major foreign companies operating within the U.S.

Ruiza Rhavenala Rahman | Manajer Divisi Kajian | Ilmu Ekonomi 2022

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