Markets watch as 2020 presidential election race heats up

3rd September 2020

Prior to the Democratic National Convention in mid-August, Biden held a 12-percentage point lead against President Trump in the USA Today/Suffolk University Poll but was unable to get the traditional post-convention bump.

Last week, the Republican National Convention (RNC) saw Trump’s White House team and immediate family deliver most of the prime-time speeches, with noticeable absences from 21 of the 23 senators up for reelection. While the President can’t be happy that he is still trailing by a large margin, he did narrow Biden’s lead to seven percentage points and seems to have some momentum following the RNC.

Biden’s team seems to be growing nervous as everyone expects the polls to tighten as we near November. Biden will also resume in-person campaigning and likely continue to make his case that President Trump is responsible for the pandemic’s high death toll, struggling economic recovery, and mounting racial tensions. President Trump will ask voters to remember how strong the economy was before COVID-19 and argue why it would excel with his positions on infrastructure spending, regulation and taxes.

The race is tightening and offering some mixed views on polls. Fox polls show that Joe Biden has leads in Arizona, Wisconsin, and North Carolina. The East Carolina University Poll shows President Trump has a slight edge in their North Carolina presidential poll. The highly coveted state of Florida’s Quinnpiac University poll has 48% of likely voters supporting Biden, while 45% backed Trump, just outside the 2.8- point margin of error.

President Trump is placing a big bet that a COVID-19 vaccine will be the catalyst for his turn-around. If one of these potential vaccine phase 3 trials work out before the election, Trump is hoping that Americans will prefer to vote for his economic platform over Biden’s. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, noted it’s ‘conceivable’ a COVID-19 vaccine could arrive as early as October, but the end of the year is more likely to see a breakthrough development. Another big uncertainty for economy is if we will see another round of lockdowns when the virus reemerges in the Fall as many Americans return to metropolitan cities.

Wall Street hates uncertainty and election night might give us nothing but that. As the polls narrow, there are growing concerns that this could end up becoming a contested election or we could see significant delays with mail-in balloting, which might take weeks for all the votes to get tallied. Everyone remembers the 2000 Florida recount which took weeks as the votes were recounted, with the Supreme Court needing to get involved. Financial markets want a clean outcome with both the presidency and Senate races.

Too much can happen over the next two months for anyone to hang their hat on what to expect, but right now it seems Biden has a strong chance of winning the election and the Democrats might take back the Senate. The Democrats are looking pretty good in the Senate races in Arizona, Colorado, Maine, Michigan, and North Carolina. No one should count out the President as he did pullout a victory against Hillary Clinton in 2016 after she had a low-mid-single digit lead.

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