The Election and Potential Market Implications

The Election and Potential Market Implications

Key takeaways

  • Voter turnout is key to winning the US election
  • To have any fiscal policy impact depends on how transformative the policy (which is dictated by how much control one party has)
  • We compare the sector impact from policy scenarios of each candidate


Exhibit 1: Historical Presidential Election Results

      Voter Turnout Popular Vote Electoral Vote*
Year Winner Loser in Millions % REG in Millions % Total %
1980 Reagan Carter 86.5 76.5 43.9 / 35.5 50.6 / 41.0 489 / 49 90.9 / 9.1
1984 Reagan Mondale 92.7 74.6 54.5 / 37.5 58.8 / 40.6 525 / 13 97.6 / 2.4
1988 Bush Dukakis 91.6 72.5 48.9 / 41.8 53.4 / 45.7 426 / 111 79.2 / 20.6
1992 W. Clinton Bush 104.4 78.1 44.9 / 39.1 43.0 / 37.5 370 / 168 68.8 / 31.2
1996 W. Clinton Dole 96.3 66.3 47.4 / 39.2 49.2 / 40.7 379 / 159 70.4 / 29.6
2000 G.W. Bush Gore 105.4 67.1 50.5 / 51.0 47.9 / 48.4 271 / 266 50.4 / 49.4
2004 G.W. Bush Kerry 122.3 72.9 62.0 / 59.0 50.7 / 48.3 286 / 251 53.2 / 46.7
2008 Obama McCain 131.5 74.4 69.5 / 60.0 52.9 / 45.6 365 / 173 67.8 / 32.2
2012 Obama Romney 129.2 68 65.9 / 60.9 51.0 / 47.2 332 / 206 61.7 / 38.3
2016 Trump H. Clinton 137.1 74.9 63.0 / 65.9 45.9 / 48.0 304 / 227 56.5 / 42.2
2020 ??? ??? - - - - - -


Source: US Election Atlas. Notes: %REG=% Registered Voters, Red = Republican, Blue = Democrat, *270 Electorate Votes Needed to Win Presidency

Who wins—voter turnout is key

If history is our guide, then the key to winning the US Presidential election on Tuesday, November 3 will be voter turnout (exhibit 2), especially turnout at the cohort level. A common theme over past elections has been candidates that energize and mobilize voters tend to win the election. A couple of observations from recent decades:

  • In 2008 and 2012, Obama rode a large turnout from the Black cohort to victory.
  • In 2016, Hillary Clinton did not energize the Black cohort and their low turnout arguably cost her the election.
  • Conversely, in 2016, Trump energized the non-White Hispanic cohort and their high turnout rates helped push him over the victory line.
  • Democrats tend to do better when younger voters have a big turnout. This was the case with Bill Clinton in 1992 and Obama in 2008.
  • Republicans tend to do better when the non-Hispanic White cohort has high turnout (they are the largest cohort, representing 73% of the electorate vs. non-Hispanic Black representing 12% of the electorate and Hispanic represents 9% of the electorate).

Unfortunately, turnout of sub-level cohorts tends to be very difficult to accurately predict. What is interesting is that the overall turnout in re-election years tends to be lower in comparison to when the electorate is selecting a new president. The reason is that a re-election campaign is often a referendum on the incumbent; does the nation want to extend his contract another four years? Electorally, this lower turnout in re-election years means that the influence of higher turnout in a certain sub-level cohort can be magnified in the aggregate results.

Exhibit 2: Total voting-age population turnout by race


Sources: Census Bureau CPS Tables, United States Elections Project

Fiscal policy—how important are elections to the economy and markets?

Well, it depends; how transformative is the policy? Typically, transformative change is hard to come by when the US government is divided (neither party has control of both the executive and legislative branches). Conversely, when one party dominates, it is much easier to transform ideology into policy. With that in mind, we contrast some of the key items from the respective policy platforms of Republican candidate, President Trump and Democratic candidate Joe Biden (exhibit 3).


The next President of the United States and his policies will influence some important sectors within the markets. This year, each candidate has a very different approach to how he will implement policy in the areas of pharmaceuticals, infrastructure, defense, trade and technology. With that in mind, the results of this year’s US election will greatly depend on voter turnout and the voter demographic of those taking to the polls. As we have seen historically, overall turnout in re-election years tends to be lower in comparison to when the electorate is selecting a new president. Ultimately, this is just one, albeit important, factor that may influence the overall markets, which will reveal their opinion on November 4.


  Trump Biden
Taxes Further reduction in individual rate. Partial reversal of Trump cuts. Corporate rate back towards 30% poses a headwind to EPS growth.
Regulation Continuation of reduction in regulations with new regulations being biased to market-friendliness. Strong growth in new regulation. More financial regulation very likely (payday lending, student lending) with a financial transaction tax very likely. Minimum wage increase.
Energy Accommodative energy policy for traditional energy. Heavy support for the green revolution. Stricter rules for fracking, emissions, pipeline development. Limited drilling on federal lands.
Healthcare Reduction of ACA funding. Public option possibility.
Pharma Loss of pricing power due to negotiated price controls More at-risk under a DEM sweep. Loss of pricing power due to negotiated price controls
Infrastructure $1 trillion-plus, focus on upgrading transportation.  Spending associated with the Green Revolution.
Defense Continued spending growth: Grew by $140bn under Trump (+20%). Cut in spending growth to fund other programs. Chance of outright reduction in spending.
Trade Continued focus on reciprocal trade agreements.  Quiet diplomacy; More coordination with allies.
Technology Continued tough stance on China could strain supply and accelerate re-domiciling of supply chains. Main areas of potential increased regulation: Privacy, Anti-trust, Taxes.

Source: Aegon AM US



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