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US Elections: The Wait for Clarity

US Elections: The Wait for Clarity

Thoughts on the Market vor 2 Jahren

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2:37

With the US presidential race being as closely contested as it
is, Michael Zezas explains why patience may be a virtue for
investors following Election Day.

----- Transcript -----

Welcome to Thoughts on the Market. I'm Michael Zezas, Morgan
Stanley's Global Head of Fixed Income and Thematic
Research.

Along with my colleagues bringing you a variety of perspectives,
today I'll be talking about why investors should prepare to wait
to get clarity on the US election result.

It's Wednesday, September 25th at 10:30am in New York.

As we all know, markets dislike uncertainty; and one of the
biggest potential catalysts between now and the end of the year
is the results of the US presidential election. So it’s important
for investors to know that the timing of knowing the outcome may
not be what you expect.

On most U.S. presidential election days, the outcome is known
within hours of polls closing in the evening. That’s because
while all votes may not yet have been counted, enough have to
make a reasonable projection about the winner.

But that’s not what happened in 2020. Vote counts were tight
across many states. A condition that was compounded by the
slowness of counting mail in ballots, which was a style of voting
more widely adopted during the pandemic. As a result, news
networks didn’t make a formal outcome projection until about four
days after election day.

Rather than a reversion to the norm of quickly knowing the result
for the 2024 election, we expect an outcome similar to 2020. It
could be days before we reliably know a result.

The same dynamics as 2020 are in play. Polls show a very close
race. And while more voters are likely to show up in person
this year, voting by mail is still expected to represent a
substantial chunk of ballots cast this cycle. That’s because many
states' rules automatically send mail-in ballots to those who
voted by that method in the last election. And some recent
news out of Georgia underscores the potential for a slower
result. The state just adopted a rule requiring all its votes to
be hand-counted.

Now, this may not matter if either candidate has enough votes
without Georgia to win the electoral college. But if Georgia
is the deciding or tipping point state then a longer wait becomes
possible. Per the 538 election forecast model, there’s about
an 11 per cent chance that Georgia plays this role.

So, bottom line, investors may have to be patient this November.
It could take days, or weeks, to reliably project an election
outcome, and therefore start seeing its market effects.

Thanks for listening. If you enjoy the podcast, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.