Managing Director, Washington Policy Analyst Ed Mills notes that the reality is the 2024 Presidential Election is likely to come down to a small number of voters in key swing states.

To read the full article, see the Investment Strategy Quarterly publication linked below. 

A series of unprecedented and historic events has completely shifted the candidates and dynamics of the race for the presidency and Congress – yet the key issues and likely market impacts of the race remain largely the same, following the entry of Vice President Kamala Harris as the Democratic challenger to former President Donald Trump. Despite a notable shift in sentiment and momentum behind Harris (compared to when Biden was the nominee) the race is likely to be close through Election Day. Given this unpredictability, we caution against viewing individual incremental shifts in either direction (especially in polling) as clear evidence that either candidate is headed to victory. On the policy/market front, while both Trump and Harris have offered some previews of their respective agendas, policy specifics will still need to be filled including monitoring who is selected for key roles in either Administration. Control of Congress will also play a key role in the ability of either candidate to enact his or her agenda.

Republicans have a clear advantage in the Senate and Democrats have a slight advantage in the House, but a sweep by either party remains a real probability – adding additional uncertainty to the 2025 agenda and market reaction. From now until November, we will be watching for a series of known factors (including longer-term momentum in polling trends and favorability statistics) and unknown factors – for example, whether the wave of momentum shifts behind either candidate heading into November, or whether the race definitively becomes framed as a referendum on either candidate.

How has the state of the race been upended?

The biggest change in the race (aside from the nominees) has been the resurgence of momentum and enthusiasm within the Democratic base, compared to when President Joe Biden was the nominee. While expectations of a 2020 rematch dominated much of the election conversation in the past year, we have consistently highlighted the possibility of unexpected events upending the race.

Those unexpected events have since occurred in spades, with the poor performance by President Biden at the June presidential debate kicking off the series of events that led to his historic withdrawal from the Democratic nomination and Harris’ rapid ascent to the top of the ticket. Harris’ clinching of the nomination was met by a material uptick in Democratic voter enthusiasm – with likely down-ballot impacts – as well as fundraising dollars and polling numbers. This will be especially impactful in House races in New York and California, where there are eight Republican House members in races that are rated as ‘toss-up.’

How has the state of the race remained the same?

To win the presidency, a candidate needs to secure 270 Electoral College votes and the structure of the Electoral College favors Republicans. As in recent presidential elections, a small set of voters in a handful of swing states are likely to determine the outcome of the 2024 presidential election. Pennsylvania is emerging as a potential tipping state, with the candidate who wins Pennsylvania having the likeliest path towards the 270 Electoral College votes necessary to win the presidency.

The market impacts of the range of electoral outcomes have also not changed on a fundamental level. We largely view Harris’ policy platform as an extension of Biden’s on key issues including trade (where we would expect a continuation of the current targeted tariff approach) and tax, where we would likely see a push to raise the corporate rate and potentially allow the individual provisions of the 2017 individual tax changes to expire. While we have gotten some additional clarity as to Harris’ specific policy priorities with regard to the cost of living and taxation, the lack of a traditional nominating process reduces the amount of policy details.

Arguments for and against each candidate

As we enter the final stretch of the 2024 election, the race between Harris and Trump remains highly competitive, and there are compelling arguments that either candidate could win. Arguments in favor of Trump include his strong base of support, the Republican advantage in the Electoral College, and historical polling misses that have underestimated his support. Conversely, there are concerns about stalled momentum, underwater favorability ratings and a 'low ceiling' (46% in 2016 and 47% in 2020) with voters in the previous elections.

For Harris, she has seen enthusiasm within the Democratic base, has achieved record-breaking fundraising numbers, has polling momentum compared to Biden’s performance, and dramatically increased her favorability rating. However, we would also highlight the structural disadvantage for Democrats in the Electoral College, and previous polling misses overcounting Democratic support. Importantly, only one sitting vice president (George H.W. Bush in 1988) has been elected president in the last 188 years.

Market volatility around elections

As the election approaches, investors should be prepared for increased market volatility – typical in the lead-up to elections. We have seen periods of weakness when there is the greatest amount of uncertainty, especially when a sweep by either political party becomes increasingly likely. We view our job as trying to bookend the risks and opportunities of various DC-related decisions. It is easier to provide narrower bands of outcomes when the election outcomes are known, especially when there is split government. When the House, Senate and White House are all controlled by the same party—more policies become possible, and outcomes become harder to predict.

That said, despite the current close race and potential for numerous factors to sway the outcome, it is crucial for investors to maintain a long-term perspective. Historically, while preelection periods often experience heightened volatility, the first year of a new presidential term typically sees positive market returns, regardless of which party wins the White House. 

   
Read the full
Investment Strategy Quarterly

Read the full
Investment Strategy Quarterly

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