One of the tightest US Presidential races in recent history is about to conclude, with the physical vote on 5th November. Long-distance and mail-in votes have already been cast during the past few weeks. The obvious question is: “who’s going to win?” The sad reality is that the only honest answer is “we don’t know.”
This is for two reasons. First, even assuming one could trust the national polls, which see Kamala Harris marginally ahead (48% vs 46.9%), this is still within the margin of error. Also, the popular vote is meaningless, because what really matters is the electoral college: the 538 delegates that actually vote for the president. In 2000, Al Gore won the national vote against George W. Bush by more than half a million votes but lost the electoral college (after the messy recount in Florida). The same happened to Hillary Clinton in 2016 versus Trump.
So, the key is understanding what’s happening in critical swing states. In this case there are seven of them, as we discussed in our recent report: Michigan, Wisconsin, Pennsylvania, Nevada, North Carolina, Georgia and Arizona. In each of these states different policy issues are being contended over, especially immigration in the South and de-industrialisation (or re-industrialisation) in the North. But in these swing states too Trump and Harris are polling within the margin of error, even if Harris is ahead in Michigan and Wisconsin, behind Trump in Georgia and North Carolina, and neck and neck with Trump in Nevada and Pennsylvania, the latter likely being the most relevant battleground state. The Economist has just revised Harris’ chances of winning upward; now they are exactly 50%. It’s like saying “it’s a coin toss.”
Now, when we discuss situations in which extreme uncertainty prevails, such as in this case, we can only discuss scenarios. Let’s do this exercise. Clearly the race is likely to be tight, and the votes in the electoral college won’t be known in full for quite some time. It’s likely that there will be an extensive recount in case of contested votes, with legal actions being brought from each side. In this context, if Trump is ahead in the counting, the Democrats are likely not to concede victory until the counting (and possibly the re-counting) is finished. And they could launch some legal challenges in case of particularly contested votes.
If however Kamala Harris seems to be ahead during the initial counting of the votes, Trump will certainly say that the vote was rigged, and that he won anyway. He may incite his voters to protest vehemently, as he did in 2020. From that point on, an escalation into chaos could ensue, with Trump unwilling to accept the verdict. One cannot rule out a spiral of violence taking place.
Markets may react positively to any news that will provide certainty as to the outcome of the election, and negatively to any news that points in the direction of a protracted legal battle between the candidates to decide who won.
Clearly, the most interesting aspect of the election will be in terms of policy differences, but this will best be discussed when we know for sure who the US president will be for the next four years.
