2020 US elections – the early results

What’s happened

Voting is complete in the US, but it is likely to be many hours or perhaps even days until we have the results – which already seem highly likely to be disputed. The early results (at time of writing) haven’t provided any major surprises, though there is clearly disappointment from the Democrats who had hoped for an early landslide. In terms of the key battleground states, Trump has held on to Florida and Ohio, and is leading in North Carolina – not a terrible blow to Biden, but winning any of these would have made his path to the White House a lot easier.

As a result, the election appears much closer than many polls had predicted, and in the absence of a clear signal early on, we now need to wait for counting in close states, many of which have had early voting, including mail-in ballots (there have been over 100 million such votes cast). Procedures on counting these ballots vary by state, many of which don’t start counting until after the polls close – a key battleground state, Pennsylvania, doesn’t expect to have the majority of its votes counted until Friday, so we could be in for the a long-haul even for the initial results.

The tone of the election has already started to darken – as mail-in ballots are counted, there is the potential for a so-called ‘Blue Shift’ where initial Trump leads based on polls shift to a Biden lead as mail-in ballots are counted (it is generally considered that Democrat-voters have been more likely to use mail-in ballots). In the early hours of the morning, Donald Trump tweeted “We are up BIG, but they are trying to STEAL the Election. We will never let them do it. Votes cannot be cast after the Poles [sic] are closed!” He has also declared victory and signalled he will seek to block further vote counting.

While the last line of the tweet is substantially untrue (it is down to state rules, several of which allow ballots to be counted even if they arrive after Election Day), it is clear that the Trump administration is gearing up for a legal dispute. Recall that in 2000, Bush vs. Gore took a month to resolve after the case went to the Supreme Court (which now has a 6-3 conservative bias). There is also some concern that tweets such as the above may rile Trump’s base, potentially leading to protests and civil unrest – across the US a number of stores have boarded up their windows and increased security as these concerns grow.

The other race we are watching is in the Senate, where the Democrats need to flip three or four seats (depending on who ends up in the White House) to take control. There are 35 seats up for election, and it remains too soon to know the outcome, and therefore whether any one party will end up controlling the legislature.

Market and investment impact

Continued uncertainty and the risk of a bitterly disputed election result are likely to have an adverse impact on market sentiment in the short term, though this is not really an investible event (given the unknowable timing). Longer term, there will be clear implications for the investment landscape depending on the outcome of these elections. We will cover more on this once we have a better idea of the election outcome, but the key themes are that a Democrat victory will likely mean more fiscal stimulus in the short term and demand-side reform in the medium term (higher corporate and personal taxes, tighter regulation but raising the minimum wage, greater healthcare provision and work protection). Conversely, a win by the Republicans will likely lead to a more limited fiscal package in the short term, and continued supply-side policies (tax cuts and lighter regulation), but could also see an extension of global trade tensions.

What happens next?

Counting of votes continues in a number of swing states, some of which can continue accepting mail-in ballots for another couple of days. If some of these are conclusive, we could still have a result later today, but Thursday or Friday is more likely. It is now entirely feasible that, despite the earlier polling, Donald Trump could be legitimately declared the winner.

Litigation is now a highly likely, not only over the result itself (with Donald Trump warning over a “major fraud on our nation”) but more immediately as the Trump administration has indicated it is seeking a halt to further ballot counting, in an apparent effort to block mail-in voting.

Patience is required, and volatility is likely to remain elevated until we have greater clarity.

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