2020 US election: staying patient as the vote unfolds
Insights

2020 US election: staying patient as the vote unfolds

There is an established process for concluding the US election, but markets may be volatile along the way

After a long night of election news, we still do not know the results of the 2020 election, with the unprecedented healthcare backdrop creating unusual circumstances in counting votes. Should investors be alarmed?

“While this isn’t ideal, it’s not unprecedented,” says Columbia Threadneedle CIO, Colin Moore. “It is not unusual to not have all votes counted on election eve, but this year is especially challenging because of the large number of mail-in and absentee ballots. The difference in voting preference between mail-in/absentee (leaning Democrat) and in-person (leaning Republican) is quite dramatic and complicates predicting the outcome in a few states regardless of current tallies. So, in the short term we need to be patient while the counting process continues. However, if we end in a stalemate, we have constitutional backstops that address inconclusive results.” Indeed, Federal law requires that we have a president on Inauguration Day, which should give investors some degree of comfort in what is likely to be a volatile period.

For now, state election boards are continuing to count votes (Figure 1). By 8 December the states must certify how they will vote in the electoral college, and on 14 December state electors will cast their electoral college ballots.

Figure 1: Post-election timeline

Nevertheless, a spike in volatility would not be surprising, particularly as investors analyse strident rhetoric, the timeline for resolution and the impact of judicial challenges along the way. “It is important to distinguish between challenges to vote counts generally and an outright refusal to hand over power or accept defeat,” says Moore. “If it turns out that Joe Biden has won the vote, we believe the Republican leadership understands that the reputation of the US would be irreparably damaged if there was not an orderly and peaceful presidential transition.”

Beyond the presidential race, the outcome in the Senate is also important for both candidates in terms of being able to implement their agendas. Several Senate races remain undecided, but the Republicans appear to have retained some of the most keenly contested seats. While not yet certain, it appears there is a greater possibility of split control of Congress regardless of the outcome of the presidential race. However, the role of the eventual vice president in tied Senate votes will be very important.

The US has seen divided government frequently, which has had the impact of limiting some of the more extreme proposals for change over that time. For some this check on power is the preferable outcome, but given the need for additional fiscal measures to address the economic damage caused by the ongoing pandemic, an ability to work together in the coming months is essential. “Mitigating the impact of Covid-19 is much more significant for the US and global economy than the outcome of the US election,” says Moore.

Summary

So, what should investors do in this period of electoral uncertainty? Stay focused on long-term goals and avoid emotional decisions. In the long run, changes in presidential administrations rarely lead to material fundamental changes in how the US economy works, especially if Congress is divided. Consequently, the basic economic tenets upon which the financial markets rely are unlikely to change. Staying focused on long-term goals remains the best course of action.

20 November 2020
Columbia threadneedle investments logo
Columbia Threadneedle Investments
Share article
Share on twitter
Share on linkedin
Share on email
Key topics
Related topics
Share article
Share on twitter
Share on linkedin
Share on email
Key topics
Related topics

PDF

2020 US election: staying patient as the vote unfolds

Important information

The research and analysis included on this website has been produced by Columbia Threadneedle Investments for its own investment management activities, may have been acted upon prior to publication and is made available here incidentally. Any opinions expressed are made as at the date of publication but are subject to change without notice and should not be seen as investment advice. Information obtained from external sources is believed to be reliable but its accuracy or completeness cannot be guaranteed.

Related Insights

2 December 2021

Responsible Investment Quarterly - Q3 2021

View the RI team's report from the third quarter of 2021
Read time - 15 min
2 December 2021

Derek Lin & Dara White

Portfolio Manager and China Specialist & Global Head of Emerging Market Equities

Emerging market equities: an exciting universe

Emerging markets are much changed from a decade ago. We talk to Dara White, Head of Global Emerging Markets Equity, and Derek Lin, Portfolio Manager and China specialist, about the major themes driving this universe, why it’s the most exciting time to be invested in EMs, and how we as investors navigate the opportunities and challenges posed by this large and diverse market
Listen time - 30 min
30 November 2021

Fixed Income Desk

In Credit - Weekly Snapshot

In Credit Weekly Snapshot – November 2021

Our fixed income team provide their weekly snapshot of market events.
Read time - 3 min

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Funds and Prices

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Investment Capabilities

We offer a broad range of actively managed investment strategies and solutions covering global, regional and domestic markets and asset classes.