How the 6 swing states will play in the election and in the markets

Andy Serwer with Max Zahn
·14-min read

When it comes to the markets—and just about everything else—the 2020 presidential election is pretty much the only story right now.

And as such we’re in an economic holding pattern until the final result is determined, which most of us believe won’t be the night of November 3. The markets will be “back and forth,” Brian G. Belski, chief investment strategist at BMO Capital Markets told Yahoo Finance, “until we get some clarity and confidence with respect to who's leading the country.”

The question then becomes—barring a decisive Donald Trump or Joe Biden landslide—when do we know who our next president is (never mind control of the Senate)?

Sirdiego Brazil, right, Geden Mulan, left, and Mary Jovan, wait to cast their votes, Monday, Oct. 19, 2020, in North Miami, Fla. Florida begins in-person early voting in much of the state Monday as the Trump campaign tries to cut into an early advantage Democrats have posted in mail-in votes in the key swing state. (AP Photo/Marta Lavandier)
Sirdiego Brazil, right, Geden Mulan, left, and Mary Jovan, wait to cast their votes, Monday, Oct. 19, 2020, in North Miami, Fla. Florida begins in-person early voting in much of the state Monday as the Trump campaign tries to cut into an early advantage Democrats have posted in mail-in votes in the key swing state. (AP Photo/Marta Lavandier)

At this point a contested election is priced in the market, which means once we know who the next president is, Trump or Biden, stocks could trend higher, though any gains in the market would likely also be somewhat contingent on the course of the COVID-19 pandemic and the disposition of any sort of stimulus package (which of course is tied back to the election.)

To begin to figure this all out, I urge you to eschew the national polls, (which mostly show Biden up by some 10%.) Those polls are tantamount to meaningless. Sure, I think it’s quite likely that Biden will win the popular vote—just like Hillary Clinton did in 2016 by 2,868,686 votes (sorry Donald, that’s a fact)—but the only tally that matters of course is winning 270 votes in the electoral college.

And that really hinges on six critical swing states; Florida, Michigan, Wisconsin, Arizona, North Carolina, and Pennsylvania. Which means that figuring out how, and when, results are counted in these states is literally the key to the kingdom. (BTW, there are all kinds of interactive graphics, which I love, that let you get in touch with your inner Karl Rove or James Carville and map out the path to victory for your candidate, like here and here.)

One thing to consider is that Election Day, at least for the time being, has become as antiquated as a daily newspaper. This year it will be more like Election Week or Election Month. To me that’s highly paradoxically given our technological capabilities. But politics, literally, keeps us eons away from having a national digital voting system. Instead, we have a mishmash of systems across these critical swing states where there are different levels of preparedness, law, litigation, COVID-19 infection and more.

Still some commonalities are clear. The polls show a tight race. And turnout is massive. Some 52 million Americans have already voted, 38.1% of those who did in 2016. Some states have already exceeded 50% of 2016 voter turnout including New Jersey, Georgia, and North Carolina. And then there’s Texas, with over 6.3 million votes cast, surpassing 70% of its total 2016 voter turnout. Experts say we could end up logging more than 150 million votes, potentially breaking records.

Note too that most states won’t begin counting early votes until Election Day, which could create not only a troublesome logjam, but also potentially more problematic, what Jim Bianco, president at Bianco Research, calls a “red mirage.”

“What's the red mirage?” Bianco asks rhetorically. “A poll earlier this week says 86% of Republicans are going to vote on Election Day. That means election night when you just count the polls, Trump's in the lead with more than 270 electoral college votes. Then you start counting all the mail in votes, [which are said to lean Democratic] and a week later Biden's on top. That's the worst case scenario for the market.” On the other hand Bianco says if the winner on election night “is the person who ultimately wins, that would be a big relief for the stock market.”

Indeed there’s plenty to be concerned about: “We have a history of handling elections badly. Some states are much worse than others. New York is a disaster area; Florida is a disaster area; Georgia is a disaster area,” says Norman Ornstein, a member of the National Task Force on Election Crises and a resident scholar at the right-leaning American Enterprise Institute. “Trump will cry foul no matter what. It’s strange to be in a position to have to worry that the president might react in a fashion much closer to an Erdogan, Orban, Sisi, or Putin than to a Bush or Reagan or McCain or Romney”.

Still Franita Tolson, a professor at the U.S.C. Gould School of Law focused on election and constitutional law, says she has “a better sense of comfort we’ll know who the president is within a couple days of Election Day,” as “enough states have the infrastructure in the place, a plan for handling ballots.” The likelihood of an outcome akin to the 2000 election in which the Supreme Court decides the winner she thinks is “low,” Noting that “we have had two presidential elections in five cycles in which the popular vote and electoral college had different people as winners. It causes a sense of urgency amongst voters.” In other words, she’s saying, more turnout would make the election less close this time.

Getting back to the six states that I’ve selected, yes, there are other states with close races like Ohio and Georgia, but I think they’ll stay in the GOP column. And then there are the split states, Maine and Nebraska, which are very interesting, and which likely in fact split, but the overall total there is only eight votes. And of course I note the critical and intriguing senate races (Republican Senator Susan Collins of Maine is concerned you might not vote), but if you care about the presidency strictly speaking this is where you focus.

So let’s go through them.

MIAMI, FLORIDA - OCTOBER 18: A caravan of supporters for Democratic presidential nominee Joe Biden drive past supporters of President Donald Trump standing on the sidewalk next to the Versailles Restaurant during a Worker Caravan for Biden event on October 18, 2020 in Miami, Florida. The caravan was part of a countywide caravan put together by union workers, activists and supporters of Joe Biden the day before polls opened for early voting in the general election. (Photo by Joe Raedle/Getty Images)
MIAMI, FLORIDA - OCTOBER 18: A caravan of supporters for Democratic presidential nominee Joe Biden drive past supporters of President Donald Trump standing on the sidewalk next to the Versailles Restaurant during a Worker Caravan for Biden event on October 18, 2020 in Miami, Florida. The caravan was part of a countywide caravan put together by union workers, activists and supporters of Joe Biden the day before polls opened for early voting in the general election. (Photo by Joe Raedle/Getty Images)

FLORIDA

This is the state that practically invented the too-close-to-call election back in 2000, (and entered ‘hanging chads’ into the vernacular.) Remember it took until December 12 before the Supreme Court essentially declared George Bush the winner and ergo decided the presidency, giving W a W with only 271 electoral votes. Polls are tight here and the state will likely play a major role in the great deciding this time around too.

So where do things stand now in the Sunshine State?

Well, first of all early voting has begun in earnest with 4.7 million cast so far out of a total of 9.38 million total votes in 2016. The deadline to request a mail in ballot is today and ballots must be received by 7 p.m. on November 3.

In Florida, counting can begin 22 days before Election Day, and while the number of ballots received can be made public, releasing the actual results early is a felony.

Very significantly, because counting early voting here can begin weeks before November 3, (much sooner than most other swing states), that means early tallies could be a mix of in-person (presumed to be leaning Red) and early voting (presumed to be leaning Blue), and thereby potentially mitigating any sort of “red mirage” and as such will be highly scrutinized.

NORTH CAROLINA

This state is not only razor-close—Biden’s ahead by 2.9 percentage points—even though it’s only gone Democrat two out of the last 12 elections (Carter 1976 and Obama 2008), it also features a roller-coaster, high-profile senate race between GOP incumbent Thom Tillis (came down with COVID-19) and Cal Cunningham (got caught sexting.)

Early voting began on October 15 and so far 2.69 million votes have been cast compared with 4.62 million total votes cast in 2016. The deadline to request a ballot by mail is October 27, and ballots must be postmarked by November 3 and received no later than November 12 by 5:00 p.m. As for counting, that can begin two weeks prior to Election Day, provided the hour and place of counting is announced. Results can’t be announced before 7:30 p.m. on Election Day.

PENNSYLVANIA

“Oh we very much are the Keystone State, especially this year,” Pittsburgh Mayor Bill Peduto told me this week, referring to Pennsylvania’s critical swing state status. (The keystone designation goes back to the early 1800s and refers to the state’s central location and its “key position of Pennsylvania in the economic, social, and political development of the United States.”)

Biden appears to have a solid lead here, but in Pennsylvania, you never know. Remember in 2016 Trump won Pennsylvania, (the first Republican to do so since H.W. Bush’s landslide in 1988 and garnered the states 20 electoral votes ) by 44,292 votes out of more than 6,000,000 cast, a difference of 0.72%, (48.18% versus 47.46%) the slimmest margin in that state in 176 years.

Early voting here has been going on since late September and so far 1.46 million votes have been cast vs. 5.97 million total votes in 2016. Two major potential delays when it comes to calling Pennsylvania. One, counting can only begin at 7 a.m. on Election Day, and the votes may not be recorded or published until after the polls close. And two, ballots are allowed to be counted as long as they’re postmarked by Election Day, even if they arrive up to three days later. Enter the lawyers. Ugh all around.

Democratic presidential candidate former Vice President Joe Biden greets children outside of the Wisconsin Aluminum Foundry in Manitowoc, Wis., Monday, Sept. 21, 2020. (AP Photo/Carolyn Kaster)
Democratic presidential candidate former Vice President Joe Biden greets children outside of the Wisconsin Aluminum Foundry in Manitowoc, Wis., Monday, Sept. 21, 2020. (AP Photo/Carolyn Kaster)

WISCONSIN

This state has seen COVID-19 cases climb 21% over the past two weeks, and is currently one of the five hardest hit states in the nation right now, according to the CDC. Since trailing the president in the polls before the COVID-19 outbreak in March, Biden has now held a six point-plus lead over Trump since early summer.

Early voting began October 20, two weeks prior to the election, across all the environs surrounding the frozen tundra of Lambeau Field (I had to get that in), and in fact a cold front did descend upon the state this past week chilling those waiting in line, in some cases for two hours or more, to the bone.

Mail-in ballots must be received by Election Day, (walk-ins by 8:00 p.m.) So far 1.22 million votes have been cast versus 2.93 million in 2016 but here too, counting can begin only after the polls open on Election Day.

MICHIGAN

Though there has been a shortage of Big Ten football this season, (the first game was just last night), there’s been plenty of political drama in Michigan this fall. To wit: a war of words between Trump and Democratic Governor Gretchen Whitmer, and the foiling of a kidnapping plot by the FBI against said governor by white supremacists. Then there’s an ongoing legal battle over whether open-carry of guns can be allowed at the polls on Election Day, if you can believe it. (Yes, you inferred right, I’m against that.)

Oh, and now comes the election.

Michigan has a pretty good track record of picking winners, 13 out of the last 17, including Trump and Obama twice, so yes, it is a bellwether’s bellwether. Early voting has been going on for weeks, and so far you have 1.98 million votes in versus 4.79 million total votes cast in 2016. Registered voters can request an absentee ballot at their clerk’s office until November 2 and all mail-in and walk-in votes must be received by 8 p.m. on Election Day. Shockingly, state Democrats and Republicans agreed to allow processing (though not actual counting) on November 2 to expedite the process though still state officials are warning that they may not be done until November 6.

ARIZONA

That the home of the late Barry Goldwater and Sheriff Joe Arpaio of Maricopa County is in play and even leaning Democratic by 3.2 percentage points speaks to the changing demographics in Arizona (remember Sheriff Joe lost his last two elections) — and in fact across the country, as well as the potential limitations of Trump’s appeal. Maricopa, which includes Phoenix now accounts for 60% of the state's population, is increasingly younger, diverse and Blue.

Here early voting began on October 7 and so far 1.17 million votes have been cast compared with total votes of 2.06 million in 2016. Mail-in ballots are due by 7:00 pm Election Day. In Arizona, counting can begin 14 days before Election Day, but results may not be released before all precincts report or one hour after the polls close on Election Day.

US President Donald Trump dances as he leaves a rally at Tucson International Airport in Tucson, Arizona on October 19, 2020. - US President Donald Trump went after top government scientist Anthony Fauci in a call with campaign staffers on October 19, 2020, suggesting the hugely respected and popular doctor was an "idiot." (Photo by MANDEL NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)
US President Donald Trump dances as he leaves a rally at Tucson International Airport in Tucson, Arizona on October 19, 2020. (Photo by MANDEL NGAN / AFP) (Photo by MANDEL NGAN/AFP via Getty Images)

So that's your six swing states. As you can see, there's potential for all kinds of foul ups. “The test of the enduring qualities of the United States becomes the nightly headline.” says David Kotok, chairman and chief investment officer of Cumberland Advisors, who currently lives in Sarasota, Florida (and is proud to say he’s already voted.) “We’ve had two hundred-twenty years of relatively peaceful transitions in elections. If this one is not peaceful, that would be a terrible shock to America.

“American markets would pay a serious price if we witness it. I fear that. I’m not selling everything in anticipation of it. But I fear the violence and it’s been encouraged by Trump. He seeded the idea and in some places that’s a problem,” Kotok says.

“If you’re a Madisonian like me, voter suppression is a growing concern,” says Jack Rakove, a professor emeritus of history at Stanford University focused on the early history of the constitution. “Go back to 1800/1801, the first peaceful transition of power under our constitutional system, and therefore a significant precedent. There was a lot of uncertainty about whether it would happen then. There were discussions in Virginia, Pennsylvania about mobilizing the militia in two Republican states to go into the capital, Washington D.C. to enforce what they thought was the right outcome. There is plausible fear of some resort to violence.”

Thanks Jack, but I’m betting we’ll see none or very little of that. Remember over a third of America has already voted—and by Election Day, that’s sure to be over 50%—and things have been quiescent. I’m sure some numbnut will bring a gun to a polling place and make a big stink. But that will be the exception.

Having said that, this election will be America’s turn to show the world and more importantly ourselves that we haven’t lost our way. That we can simply elect Biden or re-elect Trump. If it is peaceful and without shenanigans, then so be it, we will all live with the consequences, as Americans, in our own ways.

If not, heaven help us.

So stay calm. And vote!

This article was featured in a Saturday edition of the Morning Brief on October 24, 2020. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.

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