5. ELECTION CHAOS GRIDLOCK
sources: HiddenLevers, Wikipedia
Most outcomes lead to Gridlock – 51 seats is NOT a Senate Sweep
Trump + GOP Congress
Trump + Dem Congress
Biden + GOP Congress
Biden + Split Congress
Biden + Dem Congress
Trump + Split CongressStatus Quo = Gridlock
exec
senate
house
zero chance in 2020
weak control at best
GOP
GOP 53/47
DEM 235/197
Past Senate Sweeps
1994 GOP +10
2008 DEM +10
6. sources: HiddenLevers, Forbes
Elections have NO impact on
stock market long term
ELECTION CHAOS PRESIDENTIAL RETURNS
Only Incumbents to lose were
Carter (1980) + Bush (1992)
7. sources: HiddenLevers, LPL Research
Returns usually higher in Nov/Dec than Sep/Oct in election years
Pre-Election
Fizzle
Post-Election
Rally
ELECTION CHAOS MARKETS LIKE CERTAINTY
8. ELECTION CHAOS BEWARE OF AGENDAS
sources: HiddenLevers, Fidelity
^^ Points to GOP as better choice for markets ^^
Election Winner Oct-Dec S&P %Δ Same Congress?
1928 Hoover +15.1% Yes
1932 FDR -0.4 Yes
1936 FDR +4.1 Yes
1940 FDR -1.7 Yes
1944 FDR +4.5 Yes
1948 Truman -5.1 No
1952 Eisenhower +8.1 Yes
1956 Eisenhower +0.5 No
1960 JFK +7.6 Yes
1964 LBJ -0.6 Yes
1968 Nixon +0.8 No
1972 Ford +7.7 No
1976 Carter +4.8 Yes
1980 Reagan +4.6 No (Split)
1984 Reagan +0.6 No (Split)
1988 HW Bush -0.1 No
1992 Clinton +8.2 Yes
1996 Clinton +6.8 No
2000 Bush -7.8 Yes
2004 Bush +7.1 Yes
2008 Obama -22.2 Yes
2012 Obama -1.2 No (Split)
2016 Trump +3.6 Yes
9. ELECTION CHAOS BEWARE OF AGENDAS
NO GOP until 1850s
(Lincoln)
Markets like certainty, not concerned with party
sources: HiddenLevers, Fidelity
Election Winner Oct-Dec S&P %Δ Same Congress?
1928 Hoover +15.1% Yes
1932 FDR -0.4 Yes
1936 FDR +4.1 Yes
1940 FDR -1.7 Yes
1944 FDR +4.5 Yes
1948 Truman -5.1 No
1952 Eisenhower +8.1 Yes
1956 Eisenhower +0.5 No
1960 JFK +7.6 Yes
1964 LBJ -0.6 Yes
1968 Nixon +0.8 No
1972 Ford +7.7 No
1976 Carter +4.8 Yes
1980 Reagan +4.6 No (Split)
1984 Reagan +0.6 No (Split)
1988 HW Bush -0.1 No
1992 Clinton +8.2 Yes
1996 Clinton +6.8 No
2000 Bush -7.8 Yes
2004 Bush +7.1 Yes
2008 Obama -22.2 Yes
2012 Obama -1.2 No (Split)
2016 Trump +3.6 Yes
10. sources: HiddenLevers, Project 538, CNBC
MovingRIGHTMovingLEFT
Iowa Ohio Nevada Pennsylvania
Georgia Texas Colorado Virginia
Florida
Perennial
Swing State
ELECTION CHAOS SWING STATES
2020
11. ELECTION CHAOS RE-ELECTION ODDS
Probability of Winning 2020 Election
Probability of Winning 2016 Election
Biden
Trump
2016: Wider swings in win probability
2020: Very little variation in win probability
SAME
SAME
sources: HiddenLevers, Ladbrokes, Project 538
12. sources: DonaldJTrump.com, JoeBiden.com, Tax Foundation, US Treasury, BEA, Motley Fool, HiddenLevers
• COVID Stimulus 2.0
• SALT Deductions Reinstated
LIKELY
• Covid Stimulus 2.0
• Infrastructure Bill
• Corp Tax Increase
• Income Tax Increases on HNW
• Covid Stimulus 2.0
• Tax Credits to Repatriate Jobs
TRUMP WINS /
SENATE STAYS GOP
BIDEN WINS /
SENATE STAYS GOP
PERCEIVED
• Cap Gains Tax Increases
• Unemployment Perma-boost
• Increased Financial Regulation
ELECTION CHAOS POTENTIAL 2021 POLICY
DEMOCRATS
SWEEP
SAME
SAME
13. ELECTION CHAOS TRUMP STRATEGY
sources: HiddenLevers
OPTICS VICTORIES EXEC AGENCY MEDDLING
FED
3 rate cuts in 2019 during
up-trending GDP + equity market
CDC
moving responsibility for pandemic
data to HHS
Census Bureau
wrapped up several weeks early to
“avoid White House meddling”
USPS
‘nuff said
USMCA TRADE WAR
OCT SURPRISE:
VACCINE ANNOUNCEMENT
15. ELECTION CHAOS TRUMP’S OWN WORDS
sources: HiddenLevers, HBO/Axios
Kenosha, Wisconsin NOW
You know, you could have a
case where this election
won’t be decided on the
evening of November 3rd.
This election could be
decided two months later.
It could be decided many
months later. You know
why?
Because lots of things will
happen during that period
of time.
Especially when you have
tight margins, lots of things
can happen.
03 August 2020
16. ELECTION CHAOS BUSH/GORE 2000
sources: HiddenLevers, Constitution Center, US Elections Atlas
FLORIDA 2000 LESSONS OF 2000 ELECTION
7 Nov 2000:
Election Day
Supreme Court
ends vote count
Market bottom
12/20, shortly
after electors
cast votes
Supreme Court has final say on
whether recount attempts are valid
State statutes on counting deadlines
(FL – 1 week) make manual recounts
difficult without court intervention
Election law requires states to send
electoral votes to Congress by 23 Dec
MDD
-11.8%
SPX -12%
NASDAQ -23%
19. ELECTION CHAOS UGLY
EOY profit taking
normal
perception
outweighs reality
record highs for
equities + gold
Cap Gains Panic
20. GOOD
S+P 500
2950
-15%
S+P 500
3650
+5%
S+P 500
3130
-10%
BAD
PROFIT TAKING IN 2020 TO
AVOID FUTURE
TAX UNCERTAINTY
POPULAR + ELECTORAL
COLLEGE VICTORY WITH NO
DISPUTE FROM OPPOSITION
MAIL FAILS + LEGAL DISPUTES
LEAD TO CONTESTED RESULT,
SUPREME COURT RULING,
AND CIVIL UNREST
ELECTION CHAOS MACRO RISK PARITY
NASDAQ
10.3K
-12%
BASELINE
10Y
0.5%
(-19bps)
10Y
0.75%
(+6bps)
10Y
0.55%
(-14bps)
NASDAQ
12.5K
+7%
NASDAQ
9300
-20%
Cap Gains Panic
Clean Result
Legal Challenges
21. Contested Election likely, and benefits Trump more
than Biden
Diminishing Coronavirus concerns raise Trump
approval in swing states
Markets care about certainty, not who wins
Voter Suppression is built into American elections
and is often unintentional
ELECTION CHAOS WHAT TO SAY