October 27, 2020
A closer look at the 2020 elections
This November 3, America votes on the balance of power. We examine what's at stake, the possible outcomes, and what could be in store for investors' portfolios.
Determining the balance of power
When voters head to the polls in November, collectively they'll cast ballots not just for the president, but also for the entire House of Representatives and about a third of the Senate.
Who’s in control now?
The balance of power in Congress is currently split, with Democrats controlling the House of Representatives and Republicans holding a slim majority in the Senate.
Are changes on the horizon?
In the House, recent polling averages show just 50 seats that are either toss-ups or close matches. For the House to switch to a Republican majority, the GOP would need to win 38 of those 50 contests—an uphill battle, to be sure.
A reversal of fortunes in the Senate appears more likely, where the Democrats stand a good chance of regaining control. Only 2 of the 12 Democrats up for reelection appear to be in competitive races; Republicans, meanwhile, face stiff competition for 10 of the 23 seats they seek to retain or fill. If Democrats flip 4 of those seats, they’d gain a majority in the Senate.
Sources: www.fivethirtyeight.com, www.cookpolitical.com, as of September 4, 2020.
The GOP would need to flip or fill 21 seats to retake the House; the Democrats need to flip only 4 seats to recapture the Senate.
The road to the White House
The real story this fall, of course, is the contest for the presidency. While there are many factors that will come into play, one proxy for President Trump’s chances of retaining the White House is his approval rating. Looking back at the past six times a sitting president has run for reelection, those with ratings better than 40% have won second terms; those below that threshold have not.
Want more detail? See President Trump's most current and historical approval ratings here.
Home field advantage?
While Trump’s approval ratings suggest Democrat challenger Joe Biden has an opening, it’s also true that incumbents have generally had a home field advantage. History shows that voters’ presidential preferences have been cyclical: It’s been uncommon for the White House to be occupied by either party for just one term—and it’s been just as uncommon for it to remain in one party’s control for more than two terms.
How has the stock market performed under different administrations?
Despite the unknowns in November, investors can take confidence in the fact that the stock market has always been much more a reflection of the country's economic prospects than its political tenor. Over the past 40 years, two Democratic administrations topped the list of the best market environments, although the market has generally shown resilience regardless of which party occupies the White House.
Related Viewpoints:
September 9, 2020
A(nother) random walk down Pennsylvania Avenue
September 4, 2020
Financial markets and the U.S. election
Important disclosure
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Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of a fund’s investments.
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