It’s Election Time
Buckle your safety belts, the election is upon us. And no matter which candidate you support, it’s sure to be a bumpy ride. At this late stage in the process, most polls are pointing to a sizable lead for Democratic nominee Joe Biden, but one can help see flashbacks to similar positive polling numbers for 2016 nominee Hillary Clinton.
One of the key areas for the current election is that of mail-in voting, which has becoming increasingly more important given the limitations caused by the coronavirus pandemic. When election day rolls around it’s likely that the majority of the country will have already cast their ballots days, if not weeks beforehand. According to the Pew Research Center, absentee or mail-in voting accounted for 50.3% of all votes in the 2020 primaries as compared to only 27.4% of votes in the 2018 general election and 24.9% in the 2016 general election. It’s almost a forgone conclusion that the number of mail-in ballots will exceed the primary numbers from earlier this year. Nine states plus Washington DC have mailed ballots to all of their voters while 34 other states are allowing an absentee voting option for everyone.
Source: https://www.pewresearch.org/fact-tank/2020/10/13/mail-in-voting-became-much-more-common-in-2020-primaries-as-covid-19-spread/ft_20-09-29_absenteevoting_1/
Manufacturing and jobs could be the deciding factors
Jobs have always been a key factor when it comes to voting for Americans. In fact, some say that the majority of the population votes with their wallet more than their preferences in international affairs, public policy, and other key areas. A study done by FiveThirtyEight examined a slew of economic indicators to determine which indicators could best predict the outcome of a presidential election based on historical results. The results found that of all indicators ISM manufacturing index, change in nonfarm payrolls, and change in unemployment rate were most likely to predict an election outcome. This means, with greater positive changes in these indicators came a higher likelihood of the incumbent party’s candidate — in this case President Donald Trump — coming out on top.
Source: https://fivethirtyeight.com/features/which-economic-indicators-best-predict-presidential-elections/
However, the 2020 election could be an outlier due to the unpredictable nature of the coronavirus and all that it has done to suppress the US economy. The ISM manufacturing index fell to its lowest level in 10-years earlier in the year, but quickly recovered to its standard range of 50-60 shortly thereafter. Changes in nonfarm payroll and unemployment had similar trends, hitting their worst levels in April before recovering quickly. As a result, it’s likely that the outcome of this election will be much more complicated than these indicators lead-on.
The market and GDP still tell different stories
Source: https://www.macrotrends.net/2574/dow-to-gdp-ratio-chart
Not since the 1960s has there ever been a time in American history where the country’s GDP and stock market have been so disconnected. While many believe that GDP growth is the key to market growth, this has increasingly not been the case over the past decade. Yes, the economy was able to bounce back from a dismal Spring, but while the market continues to not just survive the pandemic, but thrive, the overall economy remains uncertain.
This is an especially poignant point as many Americans don’t own stocks and therefore don’t view the performance of the market as something to consider. In fact, only 55% of Americans own stocks, with the top 10% of households owning more than 87% of the total net worth in the market.
The election isn’t just about the United States
Source: https://www.bbc.com/news/election-us-2020-54541907
It’s not just those in the US that have their eye on November 3rd, the rest of the world has a vested interest in the outcome of the Presidential election as well. Everything from immigration and border control to foreign relations with key allies are all subject to change with a new political party in power.
One of the obvious areas of concern is trade relations with China. During his term in office, President Trump has made it clear he will not back down to the eastern power. Over his term in office, Trump has severally cut imports from China, while simultaneously exports have also dropped. However, this has decreased the trade deficit almost in half to $193 billion. Another term for President Trump could mean a stronger stance against China, which could result in a continued decrease of the trade deficit and/or a trade war between the two nations.
In addition, relations between the US and European Union countries is also a concern. Many US-based companies make significant profits in the EU market, leaving European countries at the mercy of US policy. A win by Biden and the Democrats could lead to increased taxes and labor market regulations, making it harder for trade and commerce between the US and EU.
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Did You Know?
Elections around the world
If you have been so focused on the US election season take a gander at some of the interesting voting and election tactics used around the world:
• India – In order to count all 800 million eligible voters, elections can take weeks.
• Sweden and France – Citizens are automatically registered to vote.
• Australia – Voters are required by law to cast a ballet. Not doing so comes with an AU$20 fine.
• Brazil – The minimum voting age is 16-years old.
• Estonia – The tech-savvy nation allows its voters to cast their ballot online.
.…(link)
Disclosures
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser
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