Page 7 - ISQ October 2020

VOTE VOTE VOTE VOTE VOTE VOTEVOTE VOTE VOTE VOTE VOTE
VOTE
VOTE
VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE INVESTMENT STRATEGY QUARTERLY VOTE VOTE VOTE VOTE VOTE VOTE
VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE
VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE Race for the White House: VOTE
VOTE VOTE VOTE VOTE VOTE VOTE VOTE The Home Stretch

“ ...election outcomes have caused short-term

volatility, but more importantly, we see that
this volatility generally quickly corrects

itself. ”

RISK FACTORS TO WATCH Republican voters. One recent poll found that 80% of Repub-
As 2020 has proven to be an extremely unusual year, we see some lican voters planned to vote in person, with Democrats about
potential ‘curve-ball’ scenarios that are worth keeping an eye on evenly split between voting in person at 50% and voting by
as we get closer to Election Day. The ‘curve-ball’ outcomes we mail at 50%. There is also anticipation that turnout could be
are most focused on include: significantly higher this year, potentially overwhelming some
precincts. Vote counting rules vary by jurisdiction, but for
1. A delay in determining the winner of the presidential or key those who count and report day-of vote totals before mail-in
congressional races
votes, we could see significant swings between initial vote
2. The impact of third party candidates, and totals and the final vote. This could lead to confusion and
3. A potential ‘contingent election’ if the Electoral College fails to increase the chance that some voters (and candidates) may
determine a winner. not accept the final outcomes as valid, potentially triggering
legal challenges or delays. After higher-than-normal rejection
IMPACT OF THIRD PARTY CANDIDATES rates of mail-in ballots during the New York primary this year,
In 2016, the margin of third party votes outpaced the difference we will be watching to see if the number of rejected ballots
between Donald Trump and Hillary Clinton in key swing states. exceeds the margin in any state or Congressional race. The
In fact, almost 30% of the Electoral College vote went to a can- bottom line is that it could be well past election night before a
didate who did not reach a majority in a state. Arizona, Florida, winner is declared. In this scenario, we expect investors to
Michigan, North Carolina, Pennsylvania, and Wisconsin all adopt a risk-off approach to the market, i.e., tend to engage in
make our list as ‘toss-up’ states. One underappreciated trait all lower-risk investments.
six of these states have in common is that they were all won by
President Trump in 2016, but all with less than 50% of the vote. CONTINGENT ELECTION
Will the lack of a viable third party candidate in these states An Electoral College tie (a realistic, although low-likelihood sce-
create a ceiling for Donald Trump as he seeks re-election? The nario) or the inability of the Electoral College to determine a
same can be said for Minnesota, which is rated as lean Demo- winner triggers constitutional procedures and elevates the
crat, but was a state won by Hillary Clinton in 2016 with less importance of the House election results. In a contingent elec-
than 50% of the vote. President Trump has been investing tion, the newly-elected House votes to select the president and
heavily in the state to see if he can move it into his column in the newly-elected Senate votes to select the vice president. The
November. twist is each state delegation in the House casts a single vote,
with a 26 vote majority (out of 50 state delegations) required to
VOTING DELAYS AND IMPACT ON OUTCOMES elect the president. Republicans are the majority in 26 state del-
Five states are conducting elections entirely by mail-in ballot egations in the current Congress, but Democrats flipping just
and 28 states and DC are offering no-excuse absentee voting. seven key Republican seats could win them back the majority
Polls suggest a substantially larger portion of Democratic (among state delegations). If the House cannot select a presi-
voters intend to vote by mail in the 2020 election relative to dent, the Senate-selected vice president will serve as acting

All expressions of opinion reflect the judgment of the author and are subject to change.

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