As we head into the post-election weekend, with the outcome of the presidential vote unresolved, we continue to keep a close eye on events. As we all know, the decision comes down to a few key states. In this unprecedented year, the number of mail-in ballots reached historic levels, which take time to count. Even when they are counted, and the results are tallied, we have already seen outcomes are being contested. In states where the numbers are close enough, it is likely that there will be recounts. All of this leads us to say that it could be some time before a final call is made.
Spotlight on Georgia
In terms of Congress, there are several races still undecided. While it is almost certain that the Democrats will retain control of the House, the Senate remains in contention, and it may all come down to Georgia. This is because Georgia requires a 50% or greater majority in order to claim victory. There is already at least one runoff race to come in January 2021 between Republican Kelly Loeffler and challenger Democrat Raphael Warnock. In addition, if incumbent Republican David Perdue cannot reach 50%, he will be facing off against Democrat Jon Ossoff in January. If Biden/Harris win and assuming there are two runoffs, which is by no means guaranteed at this point and if, and this is a big if, both Warnock and Ossoff win, then the Democrats would have a Senate majority with Kamala Harris as the tie-breaking vote. Stay tuned!
We believe this is unlikely, while remaining sensitive to the adage that “stranger things have happened,” particularly in 2020. The recent strong market gains, however, support our supposition. Those who attended our October Webinar regarding the 2020 election may remember that we closed with the thought that markets generally prefer a balance of power because it typically precludes dramatic shifts in policy or laws. This has been true historically regardless of which party takes the presidency.
Monthly data since 1789 (mix of S&P 500, Dow Jones Industrial Average, and Cowles Communication) Source: Fidelity (FMRCo.)
We remain focused on the long term while always considering the impact that shorter-term events may have on risk and opportunity. We will continue to keep a close eye on developments and keep you informed on our perspectives. We understand this may be a stressful time and are here for you. We welcome your thoughts and comments and encourage you to reach out to your advisor with any questions you may have or contact us at 212.492.7000.