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CNF Focus | U.S. Election countdown

U.S. Election countdown

The recent market volatility has been tremendous. Apart from the epidemic, the most critical influence is undoubtedly the election. The quadrennial U.S. elections will be held on November 3, just under a week away!

Who will be elected, Biden or Trump, has a bearing on the direction of the America. The two candidates are diametrically opposed on many policies.

Biden

Trump

Tax

Plans to raise taxes on businesses and individuals.

Plans to keep taxes low.

Welfare

Governments should expand universal health coverage schemes and invest more in education.

Abolish Obamacare and advocate marketization of medical and education.

Finance

Support strengthening financial supervision and tightening fiscal policies.

Support financial deregulation and maintain proactive fiscal policy

Diplomatic

Return to multilateral agreements and organizations.

Value the moral obligation and responsibility of allies.

Withdraw from TPP, Paris Agreement and other agreements or organizations.

Pursue America first and launch the trade war.

Energy &

Climate

Support the development of green energy and focus on environmental protection.

Support the development of traditional energy sources such as shale oil and believe that global warming is a hoax.

For the past four years in power, Trump has been very concerned about the stock market. He has repeatedly emphasized his desire to maintain low tax rates and low interest rates, and expects the stock market to reach new highs. If Trump is re-elected, optimism will be brought to US stocks. Biden's situation is more complicated. In the short term, the Democratic Party hopes to bring more relief policies to the people and companies affected by the epidemic, and has proposed a stimulus bill of which the amount far exceeding the Republican Party, which will help the US economy get back on track as soon as possible. In the long term, Biden advocates tightening fiscal policy, which is more negative for US stocks. The Democrats have repeatedly attacked Trump for caring too much about the performance of the stock market. [1]

Therefore, every move of the poll news before the election stimulates market sentiment. The narrowing or widening of the polling gap indicates whether there will be uncertainty or confusion in the outcome of the general election.

2016 vs 2020 presidential election poll comparison

(The solid line is the polling data for the 2020 general election, and the dotted line is the polling data for the 2016 general election. The blue line represents the Democratic Party and the red line represents the Republican Party.)

The most recent data aggregated by RCP shows Biden leading Trump by about 7.7% and leading consistently for nearly a year. But as shown from the dotted line in the chart above, Hillary was also ahead of Trump in the polls for most of 2016 but ended up losing the election. Were the polls wrong? [2]

How is the President of the United States elected?

Although everyone can vote, it may not be the person with the most votes gets elected. In 2016, Clinton Hillary had nearly 3 million more votes than Trump. The total number of votes was basically in line with the results of the polls, but she missed the position of president. [3]

The U.S. Constitution stipulates that the U.S. presidential election is the "Electoral College", which is an indirect election, rather than directly counting by voters. Each state is an electoral college, and the number of electoral votes it has equals to the total number of members of both houses of that state. For example, Florida has 2 senators and 27 representatives, so Florida has 29 electoral votes. There are a total of 538 electoral votes in the United States, and the presidential candidate with more than half of the electoral votes (270 votes) wins the general election.

Another core design of the "Electoral College" is called "Winner-take-all". If a candidate gets the lead in a state, then he will get all the electoral votes of the state. For example, as long as Biden has the lead in Florida, regardless of whether he leads by 100 votes or 1 million votes, he will get all 29 electoral votes.

Part of the reason why Hillary Clinton lost the election in 2016 was that although she had a significant lead in the number of votes in California, the "winner-takes-all" system resulted in these leads not bringing her more electoral votes. Hillary Clinton failed in Florida by a very small margin. Her approval rating was only 1% lower than Trump, but this caused her to lose all 29 electoral votes in Florida. In the end, Hillary lost by 38 electoral votes. [3]

Current national polls show that Biden has a significant lead over Trump, but by focusing on some key swing states, the advantage becomes less clear. The website Real Clear Politics integrated various poll data and shows that as of the 20th, Biden and Trump are quite close in the six swing states. Biden was leading by 1 point in Florida, 2.4 and 3.1 points in North Carolina and Arizona, and 3.8 points in Pennsylvania. [4] In these 4 swing states alone, there are 75 electoral votes, enough to influence the outcome of the general election. Considering that polls are often inaccurate by more than 2%, the current lead is not enough to tell the final result.

Another special situation this year is that many voters chose to vote early due to the impact of the epidemic. According to statistics from the U.S. Election Project, as of October 22, 45 million voters had voted in advance, breaking the historical record. In swing states with data available, Biden's vote rate is on average more than 10% higher than Trump. However, those who choose to vote early usually pay more attention to the impact of the epidemic and support the Democrats; Republicans are more inclined to vote on the spot on November 3. The current lead has limited impact on the final result. [2]

Objectively speaking, Biden's lead in swing states this year is greater than Hillary's advantage four years ago. At the same time, the methodology of this year’s polls has been improved to more closely match the final voting results. But who will win these swing states is a question full of uncertainty until November 3.

Besides the President, there's Congress.

On November 3, along with the presidential election, there will be elections for members of Congress. In this year's U.S. congressional elections, all 435 seats in the House of Representatives and one-third of the Senate are up for re-election. [5]

All US law amendments and bills involving fiscal expenditures require the approval of Congress. In 2016, the Republican Party not only won the presidential election, but also the Senate and House of Representatives. This is why Trump was able to quickly implement a series of policies such as tax cuts and withdrawal from the world organizations without much resistance. However, the Republican Party lost its majority in the House of Representatives during the 2018 midterm election. In the past two months, the two parties were unable to reach agreement on the content of the bill. The third round of stimulus bills have been delayed again and again, which has a lot to do with Republican party’s lost control of the House of Representatives.

In the upcoming election, if either the Democrats or Republicans can win both the presidential and congressional elections, then the ideas of that party's candidates will be vigorously pursued, influencing the markets over the next two years. However, if both parties win only part of the election, then things like the delayed introduction of the third round of stimulus bills over the past two months will be repeated. The extent to which the policies of the two presidential candidates can be implemented will also continue to create uncertainty in the markets.

References

[1] 观察者网,新浪新闻《民主党议员怒斥:特朗普更关心股市而不是民众健康》

https://news.sina.com.cn/w/2020-03-12/doc-iimxyqvz9868965.shtml

[2] 花长春,田玉铎,宏观长春,《国泰宏观:第二次辩论后,拜登当选几无悬念》

https://mp.weixin.qq.com/s/TN2dz8MzEugzj_112S1WWg

[3] 维基百科, 2016年美国总统选举

https://zh.wikipedia.org/wiki/2016%E5%B9%B4%E7%BE%8E%E5%9C%8B%E7%B8%BD%E7%B5%B1%E9%81%B8%E8%88%89

[4] 王山,rfi《美国总统大选决战六大摇摆州 特朗普民调紧追拜登不知鹿死谁手》

https://www.rfi.fr/cn/%E4%B8%AD%E5%9B%BD/20201021-%E7%BE%8E%E5%9B%BD%E6%80%BB%E7%BB%9F%E5%A4%A7%E9%80%89%E5%86%B3%E6%88%98%E5%85%AD%E5%A4%A7%E6%91%87%E6%91%86%E5%B7%9E-%E7%89%B9%E6%9C%97%E6%99%AE%E6%B0%91%E8%B0%83%E7%B4%A7%E8%BF%BD%E6%8B%9C%E7%99%BB%E4%B8%8D%E7%9F%A5%E9%B9%BF%E6%AD%BB%E8%B0%81%E6%89%8B

[5] 李逸华,国会报道《2020美国国会选举 盘点参议院六大关键战场》

https://www.voachinese.com/a/us-2020-senate-election-battleground-states-20200917/5587833.html

2020/10/31
CN First International Futures Limited