Head of FX Strategy
Summary: Today I offer a podcast round-up of the series of articles I have run on the US Election Countdown since last Tuesday, with a few maps on Electoral College scenarios, as well as final thoughts on where to focus as election night voting totals roll in.
Today’s article is mostly The Election Countdown Round-up Podcast I uploaded to our podcast host – please have a listen there. Also, below are a series of further notes for perspective on some of the electoral scenarios I discuss on the podcast and some final thoughts on Election Night timing.
Prior articles in this series
Electoral Map Scenarios
Below are three electoral map scenarios with very different implications for the ability of Biden and the Democrats to realize their agenda after Inauguration Day on January 20. My impression of the spectrum of likely outcomes is that a slightly stronger (add Georgia) than the “Blue Wave base case” scenario is at the middle of my distribution of likely outcomes.
Scenario: Murphy’s Law "The Train Wreck"
As I noted in my Election Countdown piece yesterday on whether the major polls and I have the situation all wrong and this Election could prove as close – or closer in electoral college terms – than 2016, then Pennsylvania is the likely key state that makes the difference – in which case the electoral college vote would likely look like what you see below. In this scenario, the only difference is that Michigan and Wisconsin flip back to the Dems with a nail-biter outcome in Pennsylvania. In such a scenario, Biden would likely win by an even larger popular vote margin than did Clinton. The situation in Pennsylvania, with suits and countersuits on whether mail-in votes can be counted a certain number of days after the election and other issues, together with a tardy counting process and low early voting totals means that if the election hangs on the outcome in Pennsylvania, we will be in for the ugliest, drawn out contested election scenario imaginable. Even a theoretical “result” of vote tallies might not be the final word. Let’s hope it doesn’t come down to this.
Scenario: Minimal Blue Wave Base Case
The map below is the likely minimal margin required by the Democrats to both send Biden over the top and to win a 50-50 for Dems in the Senate (with VP Harris casting he deciding vote) – from the current 53-47 – as the Dems are likely to lose an Alabama Senate seat, but win seats in Maine, North Carolina, Arizona and Colorado.
Scenario Three: Blue Tsunami
In this scenario, far stronger than expected turnout and polls overfitted for the 2016 election fail to register the surge in young voters in particular and we get the most lopsided results in the electoral college since 1988. The below map would be a political earthquake with Texas as the chief prize for the Dems (the 2020 census and political district redrawings and new electoral votes added there from population growth and in Georgia would further erode the traditional Republican base). This kind of result would make for a far more powerful Democratic mandate to do everything from massive stimulus to Supreme Court packing and adding Puerto Rico and Washington DC as new states, etc.
Election Night timing
Besides the two websites I have linked to for a basic overview of Election Night poll closings and the more thorough spin on how quickly results might be available, I would just add once again here that Florida in particular, but also North Carolina, are the two states most in the crosshairs in the first two-three hours after polls close. Both states will have tallied their early votes and could dump the majority of these at the closing of the polls. They will start dramatically Democrat, but how quickly that fades towards Republicans after the more Trump-leaning districts close at 20:00 US Eastern Time will be crucial. Over 90% of Florida has reported by 20:30 after which the final 10% came in slowly.
For the Blue Tsunami scenario, I would focus on Texas, results, where early in-person voter turnout has been staggering (polls close there at 21:00 and 22:00 Eastern US Time)
Ohio, Wisconsin, Pennsylvania and Michigan all report in painfully slow fashion and if overall election is a nail-biter, get ready for a long night on their account.
Keep in mind that the market projects results far more quickly than the news networks. At midnight in New York (0600 CET in Europe), the market had predicted the outcome hours earlier, even with decisive states theoretically up in the air and not called by the major networks. (only 64% of Michigan counted at midnight New York / 0600 CET, for example).
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
