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The 2020 Presidential Election

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The 2020 Presidential Election November 02, 2020 Economics Group Special Commentary Michael Pugliese, Economist [email protected] ● (212) 214-5058 The 2020 Presidential Election: The Final Update Executive Summary With Election Day finally upon us, Joe Biden remains in the driver’s seat on the road for control of the White House. Biden’s lead in both the national polls and key battleground states exceeds Hillary Clinton’s polling lead on Election Day 2016. As things stand today, a polling error roughly the size of the one that occurred in 2016 would likely not be enough to flip the election to President Trump. Control of the U.S. Senate appears more uncertain, but here too both betting markets and most leading political forecasters favor Democrats over their Republican counterparts. Of course, from sports to politics, upsets can happen, and that’s why they play the games. Could a polling error even bigger than 2016 break the election in Donald Trump’s favor? Will high voter turnout or a surge in votes cast by mail be the source of this error? Might the key battleground states vote even further to the right of the nation as a whole? Only time will tell, and in this report we examine the 2020 election from numerous angles in an effort to present the facts as they stand. But regardless of how the election shakes out, we will update our readers in the coming days with our thoughts regarding the implications of the election results for the economy. Joe Biden Is in a Relatively Strong Position Headed into Election Day Joe Biden’s lead in the Real Clear Politics national polling average sits at +6.5 points, about a half- point better than his position in our last update. This is about double what Hillary Clinton’s lead Joe Biden’s lead was on Election Day 2016, and is just a bit behind Barack Obama’s +7.6 point polling lead on in the Real Clear Election Day 2008. As we have noted in previous reports, the stability of the national polls in 2020 Politics national has been remarkable. Biden’s national polling lead throughout 2020 has been steady in the six-to- polling average ten point range (Figure 1). As can be seen in Figure 2, the 2016 race was marked by considerable sits at 6.5 points. swings over the course of the year, oscillating between periods where Hillary Clinton polled well ahead of Donald Trump and periods where the race appeared tied or Trump had a small lead. Figure 1 Figure 2 2020 General Election: Trump versus Biden 2016 General Election: Trump versus Clinton Real Clear Politics Polling Average Real Clear Politics Polling Average 55% 55% 55% 55% 50% 50% 50% 50% 45% 45% 45% 45% 40% 40% 40% 40% 35% 35% 35% 35% Joe Biden: Nov-02 @ 50.9% Hillary Clinton: Nov-08 @ 46.8% Donald Trump: Nov-02 @ 44.4% Donald Trump: Nov-08 @ 43.6% 30% 30% 30% 30% Jan-2020 Mar-2020 May-2020 Jul-2020 Sep-2020 Nov-2020 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Source: Real Clear Politics and Wells Fargo Securities This report is available on wellsfargo.com/economics and on Bloomberg WFRE. The 2020 Presidential Election: The Final Update WELLS FARGO SECURITIES November 02, 2020 ECONOMICS GROUP FiveThirtyEight’s election model assigns Joe Biden a 90% chance of winning, a noticeably stronger reading than the 71% chance it gave Hillary Clinton in 2016. Although this may not seem like a huge difference, remember that if the election were theoretically held 100 times with these respective odds, Joe Biden would win 19 more times than Hillary Clinton. Betting markets like PredictIt are less bullish on Joe Biden but still give him about a 64% chance of winning the election. Interestingly, this is reverse of what occurred in 2016; betting markets gave Hillary Clinton an 82% chance of winning on Election Day, 11 points higher than FiveThirtyEight’s model. Elsewhere, Larry Sabato’s Crystal Ball puts 321 Electoral College votes in the Biden column with 217 for Trump. As the early voting data have poured in, it is becoming increasingly likely that voter turnout will be especially high. More than 90 million people have already cast their ballot according to data It is becoming compiled by the U.S. Elections Project. For some context, about 138 million people voted in the increasingly 2016 general election. In a few states, perhaps most notably Texas, more people have already voted likely that voter in 2020 than voted in total in 2016, although some of this is likely just due to population growth turnout will be (Texas has over a million more people today than it did in 2016). The expected jump in turnout is especially high. consistent with survey data that suggests unusually high enthusiasm to vote across both parties (Figure 3) as well as the 2018 midterms, which saw the highest voter turnout in a midterm election since 1914. Figure 3 Enthusiasm to Vote Appears Relatively High Percent More Enthusiastic about Voting Than Usual, Gallup Poll 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% Republicans 40% Democrats Independents 30% 30% 2004 2008 2012 2016 2020 Source: Gallup and Wells Fargo Securities What about the state polls? As we have written previously, watching the state polls is arguably even more important than the national polls. In 2016, Hillary Clinton won the popular vote by about two percentage points, but lost the Electoral College in part because Wisconsin, the “tipping point” state that pushed Donald Trump to 270 Electoral College votes, voted about three points to the right of the nation as a whole. On average, Biden’s polling lead in the key swing states of Michigan, Wisconsin, Pennsylvania, Florida and Arizona is roughly two-to-three points bigger than Hillary Clinton’s was (Figure 4). One possible avenue to a Donald Trump victory would be for the 2020 “tipping point” state to shift further to the right of the nation, perhaps four or even five points instead of three. Figure 4 How Might a 2016 Swing State Polling Error Influence the 2020 Race? RCP 2016 Polling Average Actual 2016 Result Polling Error RCP Polling Average as of Nov. 2 Michigan Clinton +3.6 Trump +0.3 3.9 ppts Biden +5.1 Wisconsin Clinton +6.5 Trump +0.7 7.2 ppts Biden +6.6 Pennsylvania Clinton +2.1 Trump +0.7 2.8 ppts Biden + 4.3 Florida Trump +0.4 Trump +1.2 0.8 ppts Biden +1.0 Arizona Trump +4.0 Trump +3.5 -0.5 ppts Biden +1.0 Source: Real Clear Politics and Wells Fargo Securities 2 The 2020 Presidential Election: The Final Update WELLS FARGO SECURITIES November 02, 2020 ECONOMICS GROUP In our previous update, we created a hypothetical Electoral College map that examined what would For President happen if these key swing states see a polling error about the size of the one that occurred in 2016. Trump to win a At the time, it suggested an Electoral College victory for Joe Biden of 308-230. Using that same second term, the methodology today would still yield a Biden victory of 308-230 (Figure 5). That said, this scenario polling error would appear to lead to races in states like Florida and Pennsylvania that would be quite close, probably does within a point or two. Thus, for President Trump to win a second term, the polling error probably not have to be does not have to be much bigger than what occurred in 2016. much bigger than what Figure 5 occurred in 2016. Source: Wells Fargo Securities We think it is important to also emphasize that a sizable polling error could occur in either direction. We have noticed in conversations with clients that most of the focus has centered on the We think it is chances of a large polling error in Trump’s favor. Although this makes sense given that an error in important to Biden’s favor would not change projected control of the White House, it could lead to much more also emphasize sizable majorities in the House and Senate for Democrats. In the 2012 election, for example, the that a sizable polling suggested a fairly tight race, with Barack Obama up just 0.7 percentage points on Election polling error Day. Many political analysts projected a fairly close race in both the popular vote and Electoral could occur in College. President Obama would go on to win a fairly comfortable victory, with the polls at both the either direction. national and state level generally off by a few points in his favor (Figure 6). Under this scenario, Democrats could regain control of the Senate with a 3-5 seat majority instead of the 1-2 seat majority that may be more realistic if there is minimal polling error. 3 The 2020 Presidential Election: The Final Update WELLS FARGO SECURITIES November 02, 2020 ECONOMICS GROUP Figure 6 The Polls in 2012 Missed in President Obama's Favor RCP 2012 Polling Average Actual 2012 Result Polling Error National Obama +0.7 Obama +3.9 3.2 ppts Michigan Obama +4.0 Obama +9.5 5.5 ppts Wisconsin Obama +4.2 Obama +6.9 2.7 ppts Pennsylvania Obama +3.8 Obama +5.4 1.6 ppts Florida Romney +1.5 Obama +0.9 2.4 ppts Arizona Romney +7.5 Romney +9.1 -1.6 ppts Source: Real Clear Politics and Wells Fargo Securities At present, betting markets assign a 59% probability that Democrats take back the Senate and an 87% chance that they keep the House of Representatives.
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