The 2020 US election outlook: Part 2 – who’s going to win?

16 September 2020

John BriggsHead of Strategy, Americas

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Brian DaingerfieldHead of G10 FX Strategy, Americas

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The outcome of the US election has huge implications for America and the rest of the world. That means that corporates & investors need to pay close attention to what’s going on. In this article our US Strategists set out what we believe is likely to happen at this current time.

Recent experience has shown that politics has become increasingly unpredictable. The 2016 US Presidential election, for example, delivered results against the consensus expectations at the time and understandably increased scepticism in the polls.

But we think it’s still useful to make educated predictions about what’s going to happen, taking on board the lessons learned from four years ago. Let’s take a look at what we think are the likeliest outcomes of the all-important US elections coming up in November.

Trump & the myth of the silent majority

In 2016, Donald Trump was elected the 45th President of the United States, despite losing the popular vote and his opponent Hillary Clinton being seen as a shoo-in only a month before the election. That was primarily because of his “silent majority” – people who claimed to be undecided or pro-Democrat in polling, but voted for Trump on Election Day.

This time around, Democrat candidate Joe Biden is also in the lead, but will Donald Trump confound expectations once again thanks to his silent majority?

We think not. President Trump’s deficit to Biden in national polling, up to now, has generally been larger and more persistent than was his shortfall against Clinton through much of the 2016 campaign. Note that around this point in the 2016 cycle, President Trump had actually registered a number of modest leads in nationwide polling. Against Biden, however, Trump is yet to average a deficit below four points at any time.

Real Clear Politics National Polling Average - Trump vs Biden

Source: Real Clear Politics, Bloomberg

Biden isn’t Clinton

While many people might think the 2016 and 2020 elections are all about Trump, we do not think that is whole story. In reality, Trump’s victory in 2016 might have been just as much about the unpopularity of Hillary Clinton as his own popularity.

The charts below compare President Trump’s polling averages in 2016 and 2020 alongside those of Clinton in 2016 and Biden in 2020. Biden has generally polled consistently better than Clinton did in 2016. Clinton’s 47% national polling average on the eve of the 2016 election roughly matches the low point for Biden so far in this cycle, and Biden currently stands 3 points higher than Clinton did at a similar date in 2016.

RCP Polling Average Comparison - Trump 2016 vs. Trump 2020

Source: Real Clear Politics, Bloomberg

RCP Polling Average Comparison - Clinton 2016 vs. Biden 2020

Source: Real Clear Politics, Bloomberg

Along similar lines, in 2016 one CNN exit poll showed that voters who said they didn’t like either candidate ended up decisively favouring Trump over Clinton (47% to 30%). A July 2020 poll, by contrast, reported that for voters who found both candidates unfavourable, respondents said they would vote for Biden 55% to 21% over Trump – a major turnaround.

It’s state-level voting that counts

Trump might be doing badly in the national polls, but as we saw in 2016, when Hillary Clinton actually won the popular vote, national polling isn’t necessarily the deciding factor in US elections.

That’s because the US uses the Electoral College system, which assigns a number of votes to each state based on the size of their population (see more on how the Electoral College works here). Many states almost always vote Republican or Democrat, so we can essentially discount what happens in them. Much more important is the outcome in key battleground states such as Florida, Ohio, Michigan, Wisconsin, Pennsylvania, North Carolina and Arizona, which could be won by either party.

Trump is currently trailing in many of these states, so the current consensus is for Biden to win, as he just needs a few of these states to secure the Presidency.

The Democrats look set to keep control …

It’s not just the Presidency that’s being decided on 3 November – Americans will also be voting for who they want to represent them in the House of Representatives and the Senate. What happens in these votes is vitally important, because whichever candidate reaches the White House relies on House and Senate support to get their agenda through.

We expect the Democrats to retain control of the House even if Trump wins, although the size of the current Democratic majority could decline. It would require a massive shift in the national polling landscape for the Republicans to take control.

The map below shows the 2020 consensus forecast for the House of Representatives from 270towin.com. Darker colours imply safer seats for the party in question.

House Map

Source: 270towin.com as at 3 September 2020

And could the Democrats take the Senate too?

The race for the Senate is likely to be extremely close, but if the election were today, we believe it would shift to Democratic control. This is critical if Biden wishes to implement his legislative agenda. But the Democrats still face an uphill battle as the margin for error is low: even a modest shift in polling towards the Republicans by Election Day could be enough for them to hold onto their Senate majority.

Senate Map

Source: 270towin.com as at 3 September 2020

A Democratic sweep the likeliest outcome… just

Below we lay out our current conditional probability matrix, in which who wins the Senate depends on who wins the Presidency. We strongly believe that if Biden doesn’t have enough momentum to carry him into the White House, it is unlikely the Democrats will take the Senate.

We assign a 39% probability to the Democrats winning the Presidency, the House and the Senate. The next likeliest outcome, at 30%, is the Republicans winning the Presidency and the Senate, but the Democrats keeping hold of the House.

Election Probability Grid

Source: NatWest as at 3 September 2020
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