Page 9 - ISQ October 2020

VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE VOTE
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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

CONTROL OF THE SENATE: THE PATH vote count delays could stretch Election Night into Election
TO A DEMOCRATIC MAJORITY Weeks/Months. Historically, this volatility quickly corrects itself
Democrats currently hold 47 seats in the Senate, and 12 of these as the result settles. A presidential race in an uncertain and
seats are up for election in the current cycle. We consider two of unpredictable year is proving to be no exception to the trend, but
the 12 as the most likely to switch parties, with Democratic as we frequently say about DC market impacts: the ultimate out-
incumbent Doug Jones (D-AL) as the most vulnerable Democrat come is never as good as you hope, or as bad as you fear.
(President Trump won AL in 2016 by almost 28 points). Republi-
cans are defending 23 seats, with seven seats currently rated as
most likely to switch parties. If Democrats lose the Senate seat in KEY TAKEAWAYS:
Alabama, the path for Democrats to retake control of the Senate
runs through four main states to hit the 50 seat threshold (the • Election outcomes typically cause short-term vola-
vice president would cast the tie-breaking 51st vote in a Demo- tility, but we see that this volatility generally quickly
cratic administration): Arizona, Colorado, Maine, and North corrects itself.
Carolina. The next most competitive races include Georgia (two • We believe it is extremely important to avoid overly
seats), Iowa, Kansas, Montana, and South Carolina. Other seats broad or sweeping conclusions and have a discus-
in both parties are competitive and could switch parties in sion of what might be different this year versus
November, but for this article we are focused on the ‘most likely’ previous elections.
path for either party to win, or retain, a majority. • The ‘curve-ball’ outcomes we are most focused on

include: a delay in determining the winner of the
DEMOCRATS FAVOURED TO RETAIN HOUSE presidential or key congressional races, the impact
MAJORITY of third party candidates, and a potential ‘contingent
Race-by-race analysis and polling data favours Democrats to election’ if the Electoral College fails to determine a
retain the majority in the House of Representatives this fall. Dem- winner.
ocrats built a sizable majority in the 2018 midterm elections, and • We expect volatility around the election to continue
current political trends support a continuation of the dynamics the historical trend of a cautious market approach
that boosted Democrats in the midterms. Democrats are cur- leading up to November. The nature of our election
rently favoured by a notable margin in the ‘generic ballot’ test, process this year, from start to finish, will be unlike
traditionally the best indicator for the overall House result. An any in recent memory.
approximate seven point lead in the generic ballot produced a 40
seat Democratic gain in 2018, and Democrats are favoured by a
similar margin in this cycle. Democrats go into the 2020 cycle
with a 207 seat base projection compared to 172 for Republicans.
There are 56 seats rated as competitive, and 28 rated as too close
to call (toss-up seats). In order for Republicans to win back the
majority, they would have to win all 28 toss up seats, and gain
three upset victories in Democrat-favoured seats – a significant
uphill battle.

IN SHORT, EXPECT UNCERTAINTY
To conclude, we expect volatility around the election to continue
the historical trend of a cautious market approach leading up to
November. The nature of our election process this year, from
start to finish, will be unlike any in recent memory. Razor thin
margin swings could produce widely divergent outcomes, while

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