US Election Outlook: The Path to 270

Democrat Joe Biden moved closer to victory (that is 270 electoral votes) in the U.S. presidential race today as election officials tallied votes in the handful of states that will determine the outcome and protesters took to the streets. Currently, Biden stands at 253 (with 71.6 Million votes) after securing Wisconsin and Michigan. Trump, stands at 213 (with 68.1 Million votes). Even though it seems that Biden will win, a shift could easily happen as states are still counting votes in Pennsylvania (20), North Carolina (15), Georgia (16), Arizona (11), Nevada (6) and Alaska (3).

Table 1ECCounted VotesRemaining Votes to be countedBiden %Biden VotesTrump %Trump Votes
Arizona1186%14%50.51,469,34148.11,400,951
Georgia1695%5%49.12,406,77449.62,429,783
Nevada686%14%49.3588,25248.7580,605
North Carolina1595%5%48.62,655,38350.12,732,120
Pennsylvania2089%11%48.13,051,55550.73,215,969
Alaska347%53%3356,84962.9108,231
Data from CNN Politics as at 05/11 10:45 am (GMT+1 Time)
Table 2Trump LeadBiden LeadREMAINING VOTES (approx.)TOTAL VOTES (approx.)Trump Lead as % of Remaining votesBiden Lead as % of Remaining votes
Arizona-68,39068,390467,2573,337,549-15%15%
Georgia23,009-23,009254,5565,091,1139%-9%
Nevada-7,6477,647190,2791,359,136-4%4%
North Carolina76,737-76,737283,5535,671,05627%-27%
Pennsylvania164,414-164,414774,6387,042,16221%-21%
Alaska51,382-51,382186,154351,23428%-28%
Data from CNN Politics as at 05/11 10:45 am (GMT+1 Time)

As one can see from Table 2, Trump leads in four states but strongly leads in three (North Carolina, Penn. and Alaska). Historically they almost always favored Republican so we can assume that these will go to Trump. His advantage as a percentage of the remaining votes to be counted shows a lead of close to 30% in each (A higher number implies higher certainty of a Trump win as the probability of the votes swinging to the other side decreases). With this in mind we can put Trump at a predicted Electoral Vote number of 213 (current) + 15 + 20 + 3 = 251 (predicted).

On the other hand, Biden leads by approximately 15% in Arizona (as a % of Remaining votes) which we can assume he will secure and therefore this will put him in the lead 253 (current) + 11 = 264 (predicted), putting him short of 6 Electoral votes to reach 270 and win.

The two states that will most probably determine the next president of the United States are Georgia (16) and Nevada (6). Trump leads slightly in Georgia and Biden leads slightly in Nevada. Nevada presents higher uncertainty since only 86% have been counted.  Given the scenarios above; Biden only needs Nevada (264 + 6 = 270) to win the presidential race whilst Trump would require both Georgia and Nevada (251 + 16 + 6 = 273) to win.

An important determinant that could shift the remaining votes from Trump to Biden are mail-in ballots which will strangely favors Biden for a very simple explainable reason. When voting by mail started, Democrats encouraged this as a means to lower COVID infection numbers. However, this voting means was politicized and criticized by President Trump and therefore less Republican voters opted for this. Now, that mail-in ballots are being counted last and Democrats were more willing to vote by mail, we can see a further shift in favor of Biden in the final stages of the race.

Market Impact

Stock markets have been digesting the electoral progress as good news as all indices closed positively yesterday and remained in positive territory this morning. Additionally, USD lost value as investors flocked to alternative debt (mostly EU; EURUSD gained by 1.8%) pushing yields at the long end of the curve further downwards. Also, oil lost some value as market participants deem that Biden will not be good for the market as Democrats are more climate-change aware.

A major determinant of market volatility and direction is the next round of US fiscal stimulus  where Republicans and Democrats have been in constant disagreement over the amount of stimulus relief. Markets participants are looking who will have Senate majority. If Democrats or Republicans win the House but loses the Senate this means further uncertainty on the fiscal package which leads to higher volatility as both parties will put political pressure on each other to get their way.

image credit : NBC news

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