LONDON - Americans, financial markets and the world as a whole stood stunned in 2016 as Republican candidate Donald Trump secured an astonishing victory over a heavily favoured Hillary Clinton, delivering one of the greatest election upsets in US history.
“It is time for us to come together as one united people,” Trump said in his victory speech following a divisive and often rancorous presidential race.
Four years later, after enduring a global pandemic, civil unrest, and job losses comparable to the Great Depression, a fractured America will on 3November again decide the fate of the nation’s leadership.
Trump has gone from the clear favourite to underdog in the race to capture the absolute majority of at least 270 Electoral College votes needed to win the 2020 presidential election.
Trump’s opponent, former vice-president and Democratic challenger Joe Biden, offers a traditional approach and currently lies comfortably ahead in the national polls. Assuming the nonincumbent vote (Democrats and independents as a share of overall state voters) is typical, Moody’s analytics project Biden will defeat Trump with 279 electoral votes to the president’s 259 votes.
However, uncertainty remains high as a Trump election comeback cannot be dismissed. The residue of his shock victory in 2016 has naturally led to an unwillingness for pundits to assume this year’s result is a done deal regardless of what the polls may say.
Trump’s prior tactics of piecing together the requisite support from a few influential groups of voters in the right areas in the required combination of states could allow him to once again claim victory through the Electoral College even with another loss of the nationwide popular vote.
TRUMP’S RELUCTANT UNDERDOG STATUS
Throughout his early tenure, Trump enjoyed the political benefits of presiding over a strong economy that helped drive US stock markets to record highs. Even an impeachment inquiry seemed to bolster Trump’s approval rating, which peaked shortly after his Senate acquittal in early February.
But when the coronavirus pandemic spread through America and around the globe, the world’s largest economy was plunged into recession during March and April, and President Trump was knocked from his seemingly smooth path to another term.
The downturn may have been the shortest recession since the Civil War, but its repercussions will be remembered as most severe. More than 20mln Americans lost their jobs in April, and the unemployment rate remains higher than it was during the worst periods of the Great Depression.
Historically, presidents tend to lose re-elections when a recession occurs within two years of Election Day, which led to striking reversals in updated 2020 election projections.
“The pandemic has near-singlehandedly cost Trump more than 100 Electoral College votes,” said Mark Zandi, chief economist of Moody’s Analytics in July.
“In the three battleground states of Pennsylvania, Michigan and Wisconsin, the outbreak has cost the president more than 800,000 votes, equivalent to 4pct of registered voters in these three swing states.”
The biggest surprise on election night in 2016 was the defection of these three reliable bricks in the blue wall to Trump. With the election rapidly approaching, the number of coronavirus cases are surging in these particularly important northern battleground states. The pandemic could prove to be Trump’s re-election achilles heel.
Early voting, both by mail and in-person, has surged to record highs as Americans have become energised by a high-stakes election even while they seek to avoid exposure to the coronavirus. The added twist, of course, is that pandemic-driven mail-in voting raises some questions about when the result will be known.
ELECTION NIGHT AND BATTLEGROUND STATES
The US presidential election is expected to be decided by about a dozen critical states that could swing in support for Trump or Biden. Trump has repeatedly attacked election mechanics throughout his campaign, saying it would be “inappropriate” to take extra time to count the tens of millions of ballots cast by mail.
Democrats are voting early in greater numbers than Republicans this year, according to data from the US Elections Project at the University of Florida, but some states do not allow officials to even begin counting them until the polls close. Ending the tally on Election Day, as Trump suggests, could give the Republican an advantage.
Florida (Polls Close 1900 ET - 2000 ET)
Florida’s 29 electoral votes make the state a crucial step in path to the White House, with the victor here winning the presidency in every election since 1992.
If Trump wants another come from behind victory, it has to start here. If Trump wins, Biden likely must flip at least three of the following states: Arizona, Michigan, Pennsylvania, and Wisconsin. Should Biden take Florida, he can win the Electoral College with one other battleground shift to his side.
The latest Quinnipiac University poll said the Florida race is too close to call, with Biden receiving 45pct of support among likely voters and Trump at 42pct. Extremely narrow margins are to be expected in Florida after the last two elections were decided by a single percentage point.
"Short on cash and locked in a tight race, the Trump campaign tries to find a foothold in Florida, a state that would likely close the door on his re-election if Biden prevails," said Quinnipiac University Polling Analyst Tim Malloy.
Many election officials can begin scanning ballots more than three weeks before Election Day, but results cannot be generated until after polls closed. Florida has a reputation for quick counts. With the high possibility of delays elsewhere, watching the Sunshine State will be essential viewing on election night.
Georgia (Polls Close 1900 ET)
Democrats have long hoped to swing Georgia’s 16 electoral votes even as the state continues to vote Republican.
In a sign of his campaign’s growing confidence, Biden made his first stop in Georgia, a state in America’s Deep South that has not voted for a Democratic presidential candidate since Bill Clinton in 1992.
Among all registered voters in Georgia, Biden has gained ground, garnering the support 50pct of respondents compared to Trump’s 45pct, according to the latest Monmouth University poll conducted from 23-27 October.
These results represent a small swing in the Democrat’s favour, but the numbers are not statistically different from Trump’s single-point edge last month or the tied result in July.
Ballots can be opened and scanned upon receipt, but they cannot be tallied until after the polls close on 3 November.
Ohio (Polls Close 1930 ET)
With stronger Republican support than the average state, Ohio’s 18 electoral votes have proved decisive in recent presidential races. No Republican has ever won the presidency without carrying Ohio, and the state shifted hard to Trump in 2016.
A Rasmussen Reports’ telephone and online survey of likely voters in Ohio conducted October 18-19 said Biden was polling at 48pct, to points higher than the president. A Biden flip of Ohio could portend the same for two important states on its borders, Michigan and Pennsylvania.
Ballots can be scanned, but not tallied, as early as October 6, with absentee ballots are the first to be counted on election night.
New Hampshire (Polls Close Between 1900-2000 ET)
New Hampshire’s four electoral votes means it unlikely to be a tipping-point state. With Democrats carrying the New England state in the past four presidential elections, a Trump flip would give him more flexibility in his path towards a second term.
In the run-up to the election, Biden has extended his lead by 10 points in New Hampshire, according to a 9-12 October poll from the University of Massachusetts’ Lowell Centre for Public Opinion.
Ballots can be pre-processed in some New Hampshire jurisdictions beginning on 29 October, but not counted until the polls have closed on 3 November.
Texas (Polls Close 2000 ET)
No Democrat has won The Lone Star State’s whopping 38 electoral votes since Jimmy Carter in 1976, but Republican dominance here has been waning in the post-George W. Bush era.
Early voting numbers should encourage Democrats. The Associated Press reports that Texans have already cast more ballots than they did in the entire 2016 election with more than 9mln so far in early voting.
The Cook Political Report, a widely respected election-tracking organisation that periodically issues ratings in presidential races, moved Texas from “Lean Republican” to its “Toss Up” column.
Trump maintains a narrow lead in Texas, according to a New York Times/Siena College poll, as he faces a rebellion in the state’s once overwhelmingly Republican suburbs.
No pollster or analyst can be reasonably confident about what the final Texas result will look like given the significant departure from prior turnout patterns. However, if Biden clinches the state, it could be part of a national landslide.
Michigan (Polls Close 2000 ET)
Michigan’s 16 electoral votes came from Trump’s narrowest and most shocking win in 2016, when he flipped a state many Democrats had taken for granted after years of success.
Trump’s political bolster of white voters without college degrees could be on troubled ground, according to the latest poll from The New York Times and Siena College. Biden had the support of 49pct of likely voters and Trump was at 41pct, virtually unchanged from the same survey two weeks ago.
Though there are ongoing legal challenges to change the rules, currently ballots must arrive at clerks’ offices by the close of polls on Election Day. Some densely populated jurisdictions in the state can open and sort absentee ballots beginning on 2 November, but the vast majority will not.
Pennsylvania (Polls Close 2000 ET)
This may be the “Keystone State” in more than just name. Its 20 electoral votes represent one of biggest prizes of the core battleground states. Trump was the first republican since George H.W. Bush in 1988 to carry Pennsylvanian support, tipping his trajectory towards the White House.
The once-loyal Philadelphia suburbs have abandoned Republicans in the Trump era. The White House’s call for law and order have fallen on uncaring ears as recent protests and looting in parts of Philadelphia followed the police killing of a black citizen.
In what would be a vital victory in Biden’s home state, Reuters/Ipsos say he leads Trump by a narrow 50pct to 45pct margin in opinion polls conducted October 20-26. Pennsylvania ballot counting can begin at 0700 ET on Election Day.
North Carolina (Polls Close 2015 ET)
North Carolina is one of the most crucial swing states in the race for control of the White House and the Senate. A virtual must-win for Trump, whose path to a second term would narrow significantly without the Tar Heel State’s 15 electoral votes.
Biden holds a small but durable lead over Trump in North Carolina, where 64pct of likely voters said they have already cast their ballots, according to the latest New York Times/Siena College poll.
Absentee ballots can be scanned weeks in advance, but results cannot be tallied before Election Day. The US Supreme Court has blocked the Trump campaign’s effort to ban ballots postmarked by 3 November that arrive by the 12th.
Wisconsin (Polls Close 2100 ET)
Wisconsin’s 10 electoral votes represent the smallest of the “Blue Wall” states that Trump flipped. A highly polarised state, the Democrats entered the election believing it would be the most difficult to capture.
However, Biden has consistently led Trump in the polls, with the latest Reuters/Ipsos projection showing a solid margin of 53pct in Biden’s favour. Wisconsin’s ballots must be received by the close of polls on Election Day, and they cannot be counted until polls open.
Minnesota (Polls Close 2100 ET)
The Trump campaign has identified Minnesota’s 10 electoral votes as its top opportunity to play offense in 2020, recognised as key to Trump’s path back to the White House.
The once-heavily Democratic rural and small-town areas are moving sharply toward the Republican party, while the suburbs of the Twin Cities of Minneapolis-Saint Paul have raced toward Democrats.
Biden’s early momentum has been lost in the run up the election, with Trump narrowing the gap to only five points, according to a SurveyUSA Election Poll conducted in late October.
Beginning on 20 October, ballots can be opened and logged, but the results are only tabulated after polls close on Election Day.
Arizona (Polls Close 2100 ET)
A state that has come up for grabs over the past four years, Arizona’s 11 electoral votes offer an alternative gain outside the trio of northern swing states.
Hit hard by the pandemic in the late spring and summer, the latest Reuters/Ipsos opinion poll say Arizona is a dead heat. Conducted between October 21-27, the poll reported that the candidates are statistically tied as the margin is within the survey’s margin of error.
Ballots can be scanned and tabulated 14 days before November 3 but results are not reported until after polls close on Election Day.
Nevada (Polls Close 2200 ET)
Nevada has just six electoral votes, but its Democrat lean for two subsequent presidential elections represent an important building block for Biden.
Biden has a six-point advantage in the latest New York Times/Siena College poll of Nevada, where unemployment has soared amid the coronavirus pandemic. Conducted after the final Presidential debate mid-October, Biden leads Trump 49% to 43% among likely voters.
Nevada officials can begin scanning and recording ballots 14 days before the election, but results are not released until election night.
Iowa (Polls Close 2200 ET)
A possible indicator for agricultural voters, Iowa’s six electoral votes are unlikely to tip the election for one candidate or the other. An Emerson College poll conducted October 19-21 found Trump with a two-point lead over Biden, 48% to 46%, in Iowa.
Election officials can begin opening ballot envelopes on the Saturday prior to the election and scan scanning and tabulate them on 2 November.
POLICIES AND INVESTOR IMPLICATIONS
As the days count down to an election that could alter the course of global markets, memories of the shocking result in 2016 have discouraged some investors from making big directional bets.
TS Lombard’s Chief US Economist Steven Blitz notes that historically, “Equities go up in election years more frequently than in other years, regardless of whether a Democrat or Republican wins or whether the incumbent or the challenger prevails.”
Investors will likely delve into the different policy trajectories of the two candidates and how they will affect other markets, sectors, and investment themes.
Trump’s “America First” policies have granted leniency towards home-grown innovation, favouring US technology giants. This bias stops at the border as protectionist rhetoric from the president has curbed the influence of foreign technology especially from China.
Despite trade and tech wars waged against China, Chinese stocks have performed in parallel with US markets over the past four years. Blitz summarises that China will be antagonised regardless of the election winner.
“While Trump would likely continue to be tough on Beijing, Biden would not go easy on it either,” he said. “In fact, recent price action indicates that China equities investors prefer Trump to Biden, since the former is a known quantity.”
Some on Wall Street still fear that Democratic control in Washington would lead to higher taxes and regulations that could crimp corporate profits and thus undermine stock prices beyond early next year.
TS Lombard is focusing on the risk of tighter regulation on US tech companies imposed by Biden on antitrust grounds. “His proposed capital gains tax hikes would likely mean profit-taking in stocks ahead of the new rule, disproportionally affecting tech.”
Biden has been a vocal supporter of clean energy, although oil traders are increasingly cautious about casting Trump as bullish for prices and Biden as bearish. The oil industry’s fortunes have been withering on Trump’s watch, with dozens of oil companies declaring bankruptcy as weak crude prices take a toll on the sector.
Blitz argues a more nuanced response is expected from oil markets, noting that investors and the wider world have already embraced the phasing out of fossil fuels. “That said, a Democrat in the White House would provide an additional boost.”
Geopolitically, a Biden victory could pave the way for a more constructive international collaboration on a broad range of topics between the US and Europe.
Through the reversals and de-escalation of tariffs, Blitz notes that a possible Biden win appears positive for European exports as he might de-escalate the global tariff war while continuing the US-China struggle with “other, less damaging tools”.
However, the overall government election outcome will matter more than any one candidate’s success. Analysts at Morgan Stanley note the impact of a divided versus unified government likely is a better predictor of future policies than which party’s candidates come out on top.
GOVERNMENT SCENARIOS
The potential for a unified government outcome, particularly a Democratic one, are higher than in recent cycles, and markets could become more reactive if they anticipate a Democratic sweep.
According to analysts at UBS, its US office of public policy sees a 55pct probability of a Blue Wave, where Democrats win the presidency and both House of Congress.
“Such a Democratic sweep could also lead to deficit expansion, driven by healthcare and infrastructure spending,” Morgan Stanley said. “However, the demand-side stimulus would boost economic growth, pushing interest rates and inflation higher.”
Additionally, UBS said there is a 28pct chance that Trump is re-elected and the Republicans keeps control of the Senate while Democrats retain their majority in the House of Representatives.
Morgan Stanley outlined the possible results of a no-change scenario. “US interest rates would likely remain range-bound, or fall further after the election, depending on the path of the recovery. Reactive fiscal expansion is likely, and the dollar could face downward pressure.”
A Biden White House with a divided Congress has only a 15pct probability, while a Red Wave in which Republicans keep the White House and Senate and take the House has a 2pct probability, according to UBS.
It can be said that policy matters only up to a point, and the president matters more than the Senate, especially as regards the impact outside of the US nation.
TS Lombard’s Blitz warned that the election results will do little to alter the state of play in the world’s second-oldest democracy. “Whatever happens on 3 November, don’t expect changes in the secular trends that are already underway.”
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By Peter Devlin
LiveSquawk News
@dev_peter
30 October 2020
LONDON - Americans, financial markets and the world as a whole stood stunned in 2016 as Republican candidate Donald Trump secured an astonishing victory over a heavily favoured Hillary Clinton, delivering one of the greatest election upsets in US history.
“It is time for us to come together as one united people,” Trump said in his victory speech following a divisive and often rancorous presidential race.
Four years later, after enduring a global pandemic, civil unrest, and job losses comparable to the Great Depression, a fractured America will on 3 November again decide the fate of the nation’s leadership.
Trump has gone from the clear favourite to underdog in the race to capture the absolute majority of at least 270 Electoral College votes needed to win the 2020 presidential election.
Trump’s opponent, former vice-president and Democratic challenger Joe Biden, offers a traditional approach and currently lies comfortably ahead in the national polls. Assuming the nonincumbent vote (Democrats and independents as a share of overall state voters) is typical, Moody’s analytics project Biden will defeat Trump with 279 electoral votes to the president’s 259 votes.
However, uncertainty remains high as a Trump election comeback cannot be dismissed. The residue of his shock victory in 2016 has naturally led to an unwillingness for pundits to assume this year’s result is a done deal regardless of what the polls may say.
Trump’s prior tactics of piecing together the requisite support from a few influential groups of voters in the right areas in the required combination of states could allow him to once again claim victory through the Electoral College even with another loss of the nationwide popular vote.
TRUMP’S RELUCTANT UNDERDOG STATUS
Throughout his early tenure, Trump enjoyed the political benefits of presiding over a strong economy that helped drive US stock markets to record highs. Even an impeachment inquiry seemed to bolster Trump’s approval rating, which peaked shortly after his Senate acquittal in early February.
But when the coronavirus pandemic spread through America and around the globe, the world’s largest economy was plunged into recession during March and April, and President Trump was knocked from his seemingly smooth path to another term.
The downturn may have been the shortest recession since the Civil War, but its repercussions will be remembered as most severe. More than 20mln Americans lost their jobs in April, and the unemployment rate remains higher than it was during the worst periods of the Great Depression.
Historically, presidents tend to lose re-elections when a recession occurs within two years of Election Day, which led to striking reversals in updated 2020 election projections.
“The pandemic has near-singlehandedly cost Trump more than 100 Electoral College votes,” said Mark Zandi, chief economist of Moody’s Analytics in July.
“In the three battleground states of Pennsylvania, Michigan and Wisconsin, the outbreak has cost the president more than 800,000 votes, equivalent to 4pct of registered voters in these three swing states.”
The biggest surprise on election night in 2016 was the defection of these three reliable bricks in the blue wall to Trump. With the election rapidly approaching, the number of coronavirus cases are surging in these particularly important northern battleground states. The pandemic could prove to be Trump’s re-election achilles heel.
Early voting, both by mail and in-person, has surged to record highs as Americans have become energised by a high-stakes election even while they seek to avoid exposure to the coronavirus. The added twist, of course, is that pandemic-driven mail-in voting raises some questions about when the result will be known.
ELECTION NIGHT AND BATTLEGROUND STATES
The US presidential election is expected to be decided by about a dozen critical states that could swing in support for Trump or Biden. Trump has repeatedly attacked election mechanics throughout his campaign, saying it would be “inappropriate” to take extra time to count the tens of millions of ballots cast by mail.
Democrats are voting early in greater numbers than Republicans this year, according to data from the US Elections Project at the University of Florida, but some states do not allow officials to even begin counting them until the polls close. Ending the tally on Election Day, as Trump suggests, could give the Republican an advantage.
Florida (Polls Close 1900 ET - 2000 ET)
Florida’s 29 electoral votes make the state a crucial step in path to the White House, with the victor here winning the presidency in every election since 1992.
If Trump wants another come from behind victory, it has to start here. If Trump wins, Biden likely must flip at least three of the following states: Arizona, Michigan, Pennsylvania, and Wisconsin. Should Biden take Florida, he can win the Electoral College with one other battleground shift to his side.
The latest Quinnipiac University poll said the Florida race is too close to call, with Biden receiving 45pct of support among likely voters and Trump at 42pct. Extremely narrow margins are to be expected in Florida after the last two elections were decided by a single percentage point.
"Short on cash and locked in a tight race, the Trump campaign tries to find a foothold in Florida, a state that would likely close the door on his re-election if Biden prevails," said Quinnipiac University Polling Analyst Tim Malloy.
Many election officials can begin scanning ballots more than three weeks before Election Day, but results cannot be generated until after polls closed. Florida has a reputation for quick counts. With the high possibility of delays elsewhere, watching the Sunshine State will be essential viewing on election night.
Georgia (Polls Close 1900 ET)
Democrats have long hoped to swing Georgia’s 16 electoral votes even as the state continues to vote Republican.
In a sign of his campaign’s growing confidence, Biden made his first stop in Georgia, a state in America’s Deep South that has not voted for a Democratic presidential candidate since Bill Clinton in 1992.
Among all registered voters in Georgia, Biden has gained ground, garnering the support 50pct of respondents compared to Trump’s 45pct, according to the latest Monmouth University poll conducted from 23-27 October.
These results represent a small swing in the Democrat’s favour, but the numbers are not statistically different from Trump’s single-point edge last month or the tied result in July.
Ballots can be opened and scanned upon receipt, but they cannot be tallied until after the polls close on 3 November.
Ohio (Polls Close 1930 ET)
With stronger Republican support than the average state, Ohio’s 18 electoral votes have proved decisive in recent presidential races. No Republican has ever won the presidency without carrying Ohio, and the state shifted hard to Trump in 2016.
A Rasmussen Reports’ telephone and online survey of likely voters in Ohio conducted October 18-19 said Biden was polling at 48pct, to points higher than the president. A Biden flip of Ohio could portend the same for two important states on its borders, Michigan and Pennsylvania.
Ballots can be scanned, but not tallied, as early as October 6, with absentee ballots are the first to be counted on election night.
New Hampshire (Polls Close Between 1900-2000 ET)
New Hampshire’s four electoral votes means it unlikely to be a tipping-point state. With Democrats carrying the New England state in the past four presidential elections, a Trump flip would give him more flexibility in his path towards a second term.
In the run-up to the election, Biden has extended his lead by 10 points in New Hampshire, according to a 9-12 October poll from the University of Massachusetts’ Lowell Centre for Public Opinion.
Ballots can be pre-processed in some New Hampshire jurisdictions beginning on 29 October, but not counted until the polls have closed on 3 November.
Texas (Polls Close 2000 ET)
No Democrat has won The Lone Star State’s whopping 38 electoral votes since Jimmy Carter in 1976, but Republican dominance here has been waning in the post-George W. Bush era.
Early voting numbers should encourage Democrats. The Associated Press reports that Texans have already cast more ballots than they did in the entire 2016 election with more than 9mln so far in early voting.
The Cook Political Report, a widely respected election-tracking organisation that periodically issues ratings in presidential races, moved Texas from “Lean Republican” to its “Toss Up” column.
Trump maintains a narrow lead in Texas, according to a New York Times/Siena College poll, as he faces a rebellion in the state’s once overwhelmingly Republican suburbs.
No pollster or analyst can be reasonably confident about what the final Texas result will look like given the significant departure from prior turnout patterns. However, if Biden clinches the state, it could be part of a national landslide.
Michigan (Polls Close 2000 ET)
Michigan’s 16 electoral votes came from Trump’s narrowest and most shocking win in 2016, when he flipped a state many Democrats had taken for granted after years of success.
Trump’s political bolster of white voters without college degrees could be on troubled ground, according to the latest poll from The New York Times and Siena College. Biden had the support of 49pct of likely voters and Trump was at 41pct, virtually unchanged from the same survey two weeks ago.
Though there are ongoing legal challenges to change the rules, currently ballots must arrive at clerks’ offices by the close of polls on Election Day. Some densely populated jurisdictions in the state can open and sort absentee ballots beginning on 2 November, but the vast majority will not.
Pennsylvania (Polls Close 2000 ET)
This may be the “Keystone State” in more than just name. Its 20 electoral votes represent one of biggest prizes of the core battleground states. Trump was the first republican since George H.W. Bush in 1988 to carry Pennsylvanian support, tipping his trajectory towards the White House.
The once-loyal Philadelphia suburbs have abandoned Republicans in the Trump era. The White House’s call for law and order have fallen on uncaring ears as recent protests and looting in parts of Philadelphia followed the police killing of a black citizen.
In what would be a vital victory in Biden’s home state, Reuters/Ipsos say he leads Trump by a narrow 50pct to 45pct margin in opinion polls conducted October 20-26. Pennsylvania ballot counting can begin at 0700 ET on Election Day.
North Carolina (Polls Close 2015 ET)
North Carolina is one of the most crucial swing states in the race for control of the White House and the Senate. A virtual must-win for Trump, whose path to a second term would narrow significantly without the Tar Heel State’s 15 electoral votes.
Biden holds a small but durable lead over Trump in North Carolina, where 64pct of likely voters said they have already cast their ballots, according to the latest New York Times/Siena College poll.
Absentee ballots can be scanned weeks in advance, but results cannot be tallied before Election Day. The US Supreme Court has blocked the Trump campaign’s effort to ban ballots postmarked by 3 November that arrive by the 12th.
Wisconsin (Polls Close 2100 ET)
Wisconsin’s 10 electoral votes represent the smallest of the “Blue Wall” states that Trump flipped. A highly polarised state, the Democrats entered the election believing it would be the most difficult to capture.
However, Biden has consistently led Trump in the polls, with the latest Reuters/Ipsos projection showing a solid margin of 53pct in Biden’s favour. Wisconsin’s ballots must be received by the close of polls on Election Day, and they cannot be counted until polls open.
Minnesota (Polls Close 2100 ET)
The Trump campaign has identified Minnesota’s 10 electoral votes as its top opportunity to play offense in 2020, recognised as key to Trump’s path back to the White House.
The once-heavily Democratic rural and small-town areas are moving sharply toward the Republican party, while the suburbs of the Twin Cities of Minneapolis-Saint Paul have raced toward Democrats.
Biden’s early momentum has been lost in the run up the election, with Trump narrowing the gap to only five points, according to a SurveyUSA Election Poll conducted in late October.
Beginning on 20 October, ballots can be opened and logged, but the results are only tabulated after polls close on Election Day.
Arizona (Polls Close 2100 ET)
A state that has come up for grabs over the past four years, Arizona’s 11 electoral votes offer an alternative gain outside the trio of northern swing states.
Hit hard by the pandemic in the late spring and summer, the latest Reuters/Ipsos opinion poll say Arizona is a dead heat. Conducted between October 21-27, the poll reported that the candidates are statistically tied as the margin is within the survey’s margin of error.
Ballots can be scanned and tabulated 14 days before November 3 but results are not reported until after polls close on Election Day.
Nevada (Polls Close 2200 ET)
Nevada has just six electoral votes, but its Democrat lean for two subsequent presidential elections represent an important building block for Biden.
Biden has a six-point advantage in the latest New York Times/Siena College poll of Nevada, where unemployment has soared amid the coronavirus pandemic. Conducted after the final Presidential debate mid-October, Biden leads Trump 49% to 43% among likely voters.
Nevada officials can begin scanning and recording ballots 14 days before the election, but results are not released until election night.
Iowa (Polls Close 2200 ET)
A possible indicator for agricultural voters, Iowa’s six electoral votes are unlikely to tip the election for one candidate or the other. An Emerson College poll conducted October 19-21 found Trump with a two-point lead over Biden, 48% to 46%, in Iowa.
Election officials can begin opening ballot envelopes on the Saturday prior to the election and scan scanning and tabulate them on 2 November.
POLICIES AND INVESTOR IMPLICATIONS
As the days count down to an election that could alter the course of global markets, memories of the shocking result in 2016 have discouraged some investors from making big directional bets.
TS Lombard’s Chief US Economist Steven Blitz notes that historically, “Equities go up in election years more frequently than in other years, regardless of whether a Democrat or Republican wins or whether the incumbent or the challenger prevails.”
Investors will likely delve into the different policy trajectories of the two candidates and how they will affect other markets, sectors, and investment themes.
Trump’s “America First” policies have granted leniency towards home-grown innovation, favouring US technology giants. This bias stops at the border as protectionist rhetoric from the president has curbed the influence of foreign technology especially from China.
Despite trade and tech wars waged against China, Chinese stocks have performed in parallel with US markets over the past four years. Blitz summarises that China will be antagonised regardless of the election winner.
“While Trump would likely continue to be tough on Beijing, Biden would not go easy on it either,” he said. “In fact, recent price action indicates that China equities investors prefer Trump to Biden, since the former is a known quantity.”
Some on Wall Street still fear that Democratic control in Washington would lead to higher taxes and regulations that could crimp corporate profits and thus undermine stock prices beyond early next year.
TS Lombard is focusing on the risk of tighter regulation on US tech companies imposed by Biden on antitrust grounds. “His proposed capital gains tax hikes would likely mean profit-taking in stocks ahead of the new rule, disproportionally affecting tech.”
Biden has been a vocal supporter of clean energy, although oil traders are increasingly cautious about casting Trump as bullish for prices and Biden as bearish. The oil industry’s fortunes have been withering on Trump’s watch, with dozens of oil companies declaring bankruptcy as weak crude prices take a toll on the sector.
Blitz argues a more nuanced response is expected from oil markets, noting that investors and the wider world have already embraced the phasing out of fossil fuels. “That said, a Democrat in the White House would provide an additional boost.”
Geopolitically, a Biden victory could pave the way for a more constructive international collaboration on a broad range of topics between the US and Europe.
Through the reversals and de-escalation of tariffs, Blitz notes that a possible Biden win appears positive for European exports as he might de-escalate the global tariff war while continuing the US-China struggle with “other, less damaging tools”.
However, the overall government election outcome will matter more than any one candidate’s success. Analysts at Morgan Stanley note the impact of a divided versus unified government likely is a better predictor of future policies than which party’s candidates come out on top.
GOVERNMENT SCENARIOS
The potential for a unified government outcome, particularly a Democratic one, are higher than in recent cycles, and markets could become more reactive if they anticipate a Democratic sweep.
According to analysts at UBS, its US office of public policy sees a 55pct probability of a Blue Wave, where Democrats win the presidency and both House of Congress.
“Such a Democratic sweep could also lead to deficit expansion, driven by healthcare and infrastructure spending,” Morgan Stanley said. “However, the demand-side stimulus would boost economic growth, pushing interest rates and inflation higher.”
Additionally, UBS said there is a 28pct chance that Trump is re-elected and the Republicans keeps control of the Senate while Democrats retain their majority in the House of Representatives.
Morgan Stanley outlined the possible results of a no-change scenario. “US interest rates would likely remain range-bound, or fall further after the election, depending on the path of the recovery. Reactive fiscal expansion is likely, and the dollar could face downward pressure.”
A Biden White House with a divided Congress has only a 15pct probability, while a Red Wave in which Republicans keep the White House and Senate and take the House has a 2pct probability, according to UBS.
It can be said that policy matters only up to a point, and the president matters more than the Senate, especially as regards the impact outside of the US nation.
TS Lombard’s Blitz warned that the election results will do little to alter the state of play in the world’s second-oldest democracy. “Whatever happens on 3 November, don’t expect changes in the secular trends that are already underway.”