The US election is less than a week away and many pressing questions remain.
Our analysts have rounded up the top 10 most frequently asked questions on the potential impact on markets.
The top 10 questions on investors’ minds:
1. What happens if election results are contested?
Even if the election outcome is contested, the country will have a President on Inauguration Day on 20 January 2021, according to the Constitution and federal law. After the polls on 3 November, the 51 American states will have more than a month to count the ballots, including mail-in ballots, and recount if necessary. The states’ electoral votes have to be cast by 14 December, and the candidate with 270 or more votes wins. On 6 January 2021, a joint session of the Congress will convene. The results will be certified by the existing Vice-President. The elected President and Vice President will be sworn in on Inauguration Day.
However, if election issues prevent a winner from being named, the 12th Amendment of the Constitution kicks in. This provides for the House of Representatives to elect the President and the Senate, the Vice-President. The new Congress that will be formed in January will be tasked with carrying out this “contingent election”. If that also fails and the House does not elect a President by Inauguration Day, the 20th Amendment takes over. This stipulates that the Vice President-elect acts as President until a President is picked. And if no Vice-President is selected by Inauguration Day either, the Presidential Succession Act applies. This says that the Speaker of the House of Representatives, the Senate President or a Cabinet officer, in that order, would act as President until there’s a President or Vice-President.
2. What are the implications of a Democratic victory? What are the highlights of the Democrats’ agenda?
Joe Biden’s impact on Wall Street is likely to differ from that of Donald Trump. Biden’s proposal to raise corporate taxes will be closely watched. Taxes can hurt or benefit corporate profits a fair bit. Trump’s corporate tax rate cut from 35% to 21% in 2017 boosted US corporate earnings by 8-10% in 2018.
3. What are the implications of a Republican victory? What will be their focus in a second term?
The “America First” agenda remains at the heart of the Republican campaign. US incumbent presidents have won re-election 63% of the time. Since the American Civil War, only those with an economic recession during their first term were unsuccessful.
4. What happens if the President refuses to leave office after he loses the election?
There could be a few scenarios. The US Supreme Court may be asked to decide on whether the President has been selected and the status of key state votes. If the Supreme Court does not want to step in, there could be more uncertainty. While there are concerns that the military may be called in, General Milley, who is Trump’s top military adviser and chairman of the Joint Chiefs of Staff, has proclaimed that the military will not be involved in the election process and he will not follow “an unlawful order”.
5. Which sectors would be most affected by a Biden victory?
In a Biden win, the clean energy and industrial sectors may benefit. Biden has a green agenda in which one of his spending policies is to build energy-efficient infrastructure. His infrastructure bill also leans towards boosting highways, transit and green energy, potentially benefiting related industries.
In the energy sector, he may impose tougher climate-change rules and freeze public land fracking. His corporate tax hike proposal and intention to crack down on abusive lending practices and strengthen the oversight of consumer lending could also be negative for the financial sector. In healthcare, both political parties want to lower out-of-pocket costs by lowering drug pricing. Biden is more likely to make this happen. This could affect the pharmaceutical sector.
6. Which sectors would be most affected by a Trump re-election?
In a Trump win, the energy, financial and industrial sectors may benefit. He has plans to pull out of the Paris Climate Agreement and roll back limits on methane emissions. He favours energy deregulation, which would be positive for the sector. Banks booked record profits under Trump in 2018, partially thanks to his tax cuts. The “Volcker Rule” was also eased and smaller banks did not have to undergo stress tests. So generally, a Trump re-election will be positive for the financial sector. Trump also signalled an infrastructure bill previously, with spending on roads, bridges and public transport. This would boost selected industrial sectors.
7. How will the swing states determine the election outcome?
Currently, eight potential swing states – Arizona, Florida, Georgia, Michigan, Minnesota, North Carolina, Pennsylvania, and Wisconsin – have taken 127 Electoral College votes, out of a total of 538. To increase the chances of election, it is crucial to secure these states. Back in 2016, Trump won the election by winning in seven out of the eight swing states, with 0.3-0.7% marginal leads in Pennsylvania, Wisconsin and Michigan. He will need to pull off what he did in 2016 again. His main battleground will be Florida, which carries 29 electoral votes.
8. What would be the impact on US-China relations if Biden wins?
Both Biden and Trump have a common strategic purpose of de-coupling from China and moving critical manufacturing supply chains back to the U.S. Biden’s way of de-coupling is to work through the World Trade Organization and combine with allies to put pressure on China. Multilateral approaches tend to be more predictable. He also aims to reinstate the Trans-Pacific Partnership, which is likely to increase US influence over the Asia-Pacific while countering China’s growing power. Contrast this with Trump, who is tougher on China and may impose further tariffs on non-compliance.
9. Can you win the popular vote and still lose the election?
There have been five presidential elections in which the winner did not receive a plurality of the popular vote*. The five included the 1824 election, the first US presidential election when the popular vote was recorded. Instead of the nationwide popular vote determining the outcome of the election, the President of the US is decided by votes cast by electors of the Electoral College. This means that when Americans cast ballots in a presidential election, they are choosing electors and telling them which candidate they think their states’ electors should support. The presidential elections of 1876, 1888, 2000 and 2016 produced an Electoral College winner who did not receive the most votes in the general election. During the last election in 2016, Democratic nominee Hillary Clinton won 2.1% more of the popular vote than Donald Trump, but Trump went on to become President.
*A plurality vote in the US is like the relative majority in the UK and Commonwealth. In a plurality vote, a candidate polls more votes than any other but does not receive more than half of all the votes cast. https://en.wikipedia.org/wiki/Plurality_(voting)
10. When will the result become official?
The result is usually called on the night of Election Day. This year, it will be 3 November. The result can become official if either Trump or Biden declares victory and the result is uncontested. Otherwise, the deadline for resolving poll disputes under the 1887 Electoral Count Act is 8 December. Should either or both refuse to concede, they can take the election fight to the Congress. Under the Constitution, Congress has the responsibility to count Electoral College votes. Should the Democrats and Republicans agree that no President has been selected, the Supreme Court may be asked to step in.
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