Ther latest poll averages have Biden still cruising to a win at the headline level:
And battleground states:
Plus betting markets:
The Economist has also declared its polling for a Democratic senate:
We’re all jaded about polls. Watch the below video from FiveThirtyEight. It captures what happened to 2016 polls and how they’ve reformed their methodologies since:
This points to a few issues for me.
Everyone likes to talk about those uneducated voters not telling pollsters the truth about their intentions to vote Trump. But that is surely no longer the case. From what I see, Trump supporters are the most vocal in the universe today.
The pollster’s post-2016 weightings are designed to capture this phenomenon. But, if it no longer exists, then are their weightings, in fact, now underdoing the Democratic vote?
Finally, ever since COVID-19 took off, Trump polling has suffered most when the virus kills more people, as you’d expect. That is the case right now:
It looks to me like the ‘blue wave’ is still the base case. Not that that matters much if Nouriel Roubini is right:
More ominous is the prospect of a long-contested result, with both sides refusing to concede as they wage ugly legal and political battles in the courts, through the media, and on the streets. In the contested 2000 election, it took until December 12 for the matter to be decided: the Supreme Court ruled in favor of George W. Bush, and his Democratic opponent, Al Gore, gracefully conceded. Rattled by the political uncertainty, the stock market during this period fell by more than 7%. This time, the uncertainty could last for much longer – perhaps even months – implying serious risks for the markets.
This nightmare scenario must be taken seriously, even if it currently seems unlikely. While Biden has consistently led in the polls, so, too, had Hillary Clinton on the eve of the 2016 election. It remains to be seen if there will be a slight surge in “shy” swing-state Trump voters who are unwilling to reveal their true preferences to pollsters.
Moreover, as in 2016, massive disinformation campaigns (foreign and domestic) are underway. US authorities have warned that Russia, China, Iran, and other hostile foreign powers are actively trying to influence the election and cast doubt on the legitimacy of the balloting process. Trolls and bots are flooding social media with conspiracy theories, fake news, deep fakes, and misinformation. Trump and some of his fellow Republicans have embraced lunatic conspiracy theories like QAnon, and signaled their tacit support of white supremacist groups. In many Republican-controlled states, governors and other public officials are openly deploying dirty tricks to suppress the votes of Democratic-leaning cohorts.
On top of all this, Trump has repeatedly claimed – falsely – that mail-in ballots cannot be trusted, because he anticipates that Democrats will comprise a disproportionate share of those not voting in person (as a pandemic-era precaution). He also has refused to say that he will relinquish power if he loses, and has instead given a wink and a nod to right-wing militias (“stand back and stand by”) that have already been sowing chaos in the streets and plotting acts of domestic terrorism. If Trump loses and resorts to claiming that the election was rigged, violence and civil strife could be highly likely.
Indeed, if the initial reported results on election night do not immediately indicate a sweep for the Democrats, Trump would almost certainly declare victory in battleground states before all mail-in ballots have been counted. Republican operatives already have plans to suspend the counting in key states by challenging such ballots’ validity. They will be waging these legal battles in Republican-controlled state capitals, local and federal courts stacked with Trump-appointed judges, a Supreme Court with a 6-3 conservative majority, and a House of Representatives where, in the event of an Electoral College draw, Republicans hold the majority of state delegations.
At the same time, all of the white armed militias currently “standing by” could take to the streets to foment violence and chaos. The goal would be to provoke leftist counter-violence, giving Trump a pretext to invoke the Insurrection Act and deploy federal law enforcement or the US military to restore “law and order” (as he has previously threatened to do). With this endgame apparently in mind, the Trump administration has already designated several major Democratic-led cities as “anarchist hubs” that may need to be put down. In other words, Trump and his cronies have made clear that they will use any means necessary to steal the election; and, given the wide range of tools at the executive branch’s disposal, they could succeed if early election results are close, rather than showing a clear Biden sweep.
To be sure, if early results on election night show Biden with a strong lead even in traditionally Republican states such as North Carolina, Florida, or Texas, Trump would find it much harder to contest the result for more than a few days, and he would concede sooner. The problem is that anything short of a clear Biden landslide will leave an opening for Trump (and the foreign governments supporting him) to muddy the waters with chaos and disinformation as they maneuver to shift the final decision to more sympathetic venues such as the courts.
This degree of political instability could trigger a major risk-off episode in financial markets at a time when the economy is already slowing and the near-term prospects for additional policy stimulus remain grim. If an election dispute drags on – perhaps into early next year – stock prices could fall by as much as 10%, government bond yields would decline (though they are already quite low), and the global flight to safety would push gold prices higher. Usually in this type of scenario, the US dollar would strengthen; but, because this particular episode would have been triggered by US-based political chaos, capital might actually flee from the dollar, leaving it weaker.
One thing is certain: a highly contested election would cause further damage to America’s global image as an exemplar of democracy and the rule of law, eroding its soft power. Particularly over the past four years, the country has increasingly come to be regarded as a political basket case. While hoping that the chaotic outcomes outlined above do not come to pass – polls still show a strong lead for Biden – investors should be preparing for the worst, not just on election day but in the weeks and months thereafter.
To be honest, I think Dr Doom is overdoing this. The one great asset that the US has on its side if this fight comes to pass is Donald Trump himself. A few tweets do not a coup make. These are the tactical outbursts of an unhinged president.
Trump will need a very cleverly constructed series of strategies to destroy American democracy. He would need to have thoroughly discredited the electoral process when he has only pinged a few tweets, to have mass on-the-ground command and control of insurgent supporters who more appear a protest rabble, to have recruited the personal loyalty of supreme court judges not just lean on conservative instincts and today we have seen attempted mail-in voter suppression struck down, as well as to have quietly recruited top generals to his cause when he is largely disliked by the military.
I expect that Trump will do with his coup what he has done with most other stuff he has touched.
Balls it up.
