US Election 2020 - still a waiting game

04 Nov 2020

Victoria Clarke

Economist

With the US election result in the balance, what happens next and how have markets reacted?

As the UK woke this morning the outcome of the US election remained unclear. At 7am the reported electoral college vote tally, which determines the presidency, stood at 213 to President Donald Trump and 220 for former Vice-President Joe Biden, leaving both candidates short of the 270 to win.
 
Critically, results in key battleground states such as Pennsylvania, Wisconsin and Michigan remained uncertain with many votes still to be counted. The vast numbers of mail-in votes that this election has, predictably, delayed results. In other key battleground states, there is a mixed picture, where news reports suggest President Trump is set to hold battlegrounds of Florida and Ohio, but results from the two states are not yet final. Arizona appeared to be on track for a Biden win. 
It remains unclear which of the rivals look more likely to come out on top. Both men maintain that they have a path to 270 votes, with the results for Pennsylvania, Wisconsin and Michigan critical. In the main, early results appear to show Mr Trump outperforming against poll expectations and certainly well in contention to hold the presidency. However, mail-in votes and absentee ballots, which they paused counting in the key state of Pennsylvania, are likely to lean more heavily towards Democratic support.
 
In North Carolina, another key swing state, counting of mail ballots can continue until 12 November. In Georgia, election results for Fulton county, which includes the majority of Atlanta, will be delayed after a pipe burst in a room where absentee ballots were being counted. Meanwhile, adding to the state of confusion, it is being reported that in one district in Florida, turnout has been greater than 100%, adding to concerns that we could well face a contested result.
Victoria Clarke Economist

It remains unclear which of the presidential rivals look more likely to come out on top. Both men maintain that they have a path to victory, with the results for Pennsylvania, Wisconsin and Michigan critical.

Victoria Clarke, Economist

Speaking earlier this morning, Joe Biden called on supporters to be patient, while stating his belief that he was on track to win the election. Mr Biden indicated a result might be clear by Thursday morning. However, President Trump also predicted a big win while reminding his followers of his concerns stating that they are "trying to steal the election". The latter certainly provides a reminder of the scope for a contested result. 
 

Battle for control of the Senate 

Away from the presidential race, the Senate contest also remained uncertain with just under a third of the 35 senate races still to be called. The Democrats have had apparent success in the Colorado and Arizona races. However, Republican Susan Collins appeared to be doing well in Maine, while Republican Joni Ernst looked to have held on in Iowa’s Senate seat.
Amid this mixed picture it remained unclear whether, at the end of all of this, the Senate would remain under Republican control or shift into Democratic hands. The House of Representatives appeared on track to remain under the control of the Democrats, but even here results were not final. As such, all the pre-election talk of a "Blue Wave", paving the way for a big stimulus package, has dissipated.

Market reaction

In markets, the US dollar has firmed somewhat overnight, currently trading at $1.1650 against the euro and standing at $1.2980 against the pound. Despite the lack of clarity, however, risk sentiment has not soured broadly. In fixed income markets, 10-year US Treasury bond yields were 10 basis points lower at 0.80% at the time of writing. However, this might as much be attributed to diminished optimism over the prospect of a huge Democratic-led fiscal stimulus package.
 
Asian equity markets were in the green at the time of writing, but US futures are mixed. Notably, the NASDAQ future is up 2%, while the Dow future is 0.5% lower, reflecting diminished prospects of a big Democratic victory and the two parties’ respective approaches to big technology companies and fiscal stimulus.

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