Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
Bob Mason

The Latest

There is one week remaining until the 2020 U.S Presidential Election and the markets are getting a little jittery.

While there have been no major scandals to sway voters, the U.S is in the midst of a 2nd wave of the COVID-19 pandemic.

In spite of the handling of the COVID-19 pandemic, however, Trump has managed to stay within range of Joe Biden.

The U.S President would have hoped for an effective vaccine ahead of next week’s election. It isn’t to be, however, which does leave the election hanging in the balance.

On paper, Trump’s re-election would be market positive, largely because of his business-friendly policies. In reality, however, failing to control both houses would leave Trump hand-tied for the next 4-years.

For this reason, the markets are looking for a “Blue Wave”. While Biden will repeal most, if not all of Trump’s policies, fiscal support would be delivered with ease, which is good enough for now.

As Election Day draws near-, however, some of the swing states are just too close to call and Biden’s lead in others is not hugely significant. This gives Trump a glimmer of hope and also gives the markets a seed of doubt over whether the Democrats can deliver a clean sweep.

If the last few weeks are anything to go by, failure to win both houses would likely lead to a political deadlock and very little substance over the 4-years ahead.

That’s before even considering the fact that Trump would likely contest a closely fought Presidential Election race. Assuming he loses…


The Polls

As both Trump and Biden make their final bids to become the 46th U.S President, the markets are taking a closer interest in the polls.

It may have been 4-years ago, but Trump’s shock victory and market response will not be a distant memory…

Based on the latest FT’s interactive Calculator and polling data, Biden has seen his lead hold steady following last week’s Presidential Debate.

The Challenger

As at 27th October 2020, the FT poll tracker projects Biden to win 279 Electoral College votes.

This is unchanged since a rise from 255 projected votes back on 23rd September.

Looking at the breakdown, the FT sees Biden holding 207 solid votes and 72 votes leaning in his favor. The split has remained unchanged over the last week.

Of the 72 Electoral College votes leaning in favor of Biden, Michigan, Pennsylvania and Wisconsin are swing states. These account for 46 of the 72 votes.

The other swing states are Arizona, Florida, Iowa, North Carolina, and Ohio, all of which remain on the fence. These account for 79 Electoral College votes.

When looking at the fence-sitters, Trump has slender leads in Iowa (0.1 pp) and Ohio (1.8 pp) based on rolling 14-day averages. Trump’s lead in Iowa slipped from 0.2pp last week while increasing from 1.7pp in Ohio.

By contrast, Biden has held onto reasonable but not significant leads in Arizona (3.7 pp), Florida (1.7 pp), and North Carolina (2.7 pp). While seeing his lead in Arizona increase, Biden’s lead in Florida and North Carolina fell from a previous week 2.3 pp and 3.3 pp respectively.

The narrowing in 2 of the 3 fence sitters leaning marginally in favor of Biden makes it even closer to call…

Incumbent Trump

For the U.S President, the FT projects a haul of 125 Electoral College votes. This is unchanged since a fall from 143 votes projected as at 23rd September.

The FT projects Trump to currently hold 83 solid votes, which is unchanged over the week.

Electoral College votes leaning in Trump’s favor have also held steady at 42.

The bad news for U.S President Trump is that he still does not have a single swing state leaning in his favor.

The Toss-up States

We’ve not seen movement here in recent weeks. The number of states sitting on the fence has remained unchanged at 134 Electoral College votes since 140 Electoral College Votes back on 23rd September.

5 of the states sitting on the fence are swing states and account for 79 Electoral College votes. And there’s Texas, with 38 Electoral College votes to also consider.

For Trump, however, even with all of the “Toss-Up” States voting in his favor, he would still fall short of 270.

That being said, a closely fought race would likely see Trump refuse to concede and contest the outcome.

Political Deadlock

One area of concern remains Trump’s unwillingness to concede. Based on the current projections, if Trump were to win all of the “Toss Up” states and his leaning and solid votes, he would win 259 votes. Biden would win the election with 279 votes. Trump would most likely then contest the outcome of the Election and postal votes in particular.

A prolonged period of political uncertainty amidst the 2nd wave of the COVID-19 pandemic would rile the global financial markets.

While political deadlock is a major concern, there is the possibility that Trump wins the U.S Presidential Election for a 2nd time.

Away from the U.S Presidential Election, there is also the senate race for the markets to consider. Winning the senate race is considered key to being able to deliver policies over the next 2-years.

There is also plenty of uncertainty over the outcome and whether the Democrats can reclaim the senate.

The Week Ahead

It is, therefore, not surprising that some market anxiety has become evident in recent days.

We can expect the markets to consider the polls in the coming days but discount any movements.

As we saw back in 2016, the polls can be misleading and a surprise outcome can have a material impact on market risk appetite.

So, we can expect some choppiness to creep in, with swings not too dissimilar to Monday on the cards.

As Biden looks to cement his lead going into next week’s election, Trump will no doubt use any means necessary in a bid to narrow the gap.

If the VIX is anything to go by, it’s going to be an interesting few days ahead.

At the time of writing, the U.S Dollar Spot Index was up by 0.21% to 93.1234.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.