“Disputed Election” Scenario is Still Alive
Author: Greg Valliere
October 27, 2020
THE FINANCIAL MARKETS HAVE PLENTY TO WORRY ABOUT: The raging Covid-19 epidemic, higher taxes if Joe Biden wins, the lack of any fiscal stimulus, etc.
AND THE MARKETS ALSO HAVE TO WORRY about a disputed election — “crooked, dishonest things will happen” in Pennsylvania, President Trump declared yesterday.
TRUMP ARGUED DURING THE SUMMER THAT the election will be “rigged” against him, and he has not abandoned that assertion. He believes mail-in ballots are fraudulent, and he has a handful of examples to cite where there were irregularities (despite a generally scandal-free history of voting by mail).
THERE ARE TWO TROUBLING SCENARIOS —
1. Scenario One: We probably won’t know the winner for several days after the election. This appears to be increasingly likely, as officials in several states concede that they can’t quickly count a tidal wave of mail-in ballots. Northern states like Pennsylvania are not expected to report final results on election night.
2. Scenario Two: Should Trump appear to lose narrowly in states like Arizona or Pennsylvania, and should he appear to lose narrowly in Electoral College votes, he has promised to seek a reversal in the courts, claiming that mail-in ballots were corrupted.
THIS SECOND SCENARIO IS THE MOST SERIOUS: Trump could instruct Attorney General William Barr to appeal all the way up to the conservative Supreme Court, demanding recounts in several states with high rates of mail-in ballots.
IT’S WORTH NOTING that in 2000, the high court did not declare until Dec. 12 that George W. Bush beat Al Gore in Florida.
GOING INTO THIS COMING WEEKEND, Biden needs to to be ahead in the popular vote by at least 4 or 5 points. That’s because he will win landslides in California and New York, good for 3 points of a 4 or 5 point win. So if Biden’s lead in the rest of the country, therefore, is only 1 or 2 points, that would be an indication that the battleground states could be close enough to warrant recounts — and litigation.
IF BIDEN’S FINAL MARGIN IS OVER 5%, recounts and litigation would seem unlikely. But Trump and his followers won’t accept defeat easily, and they will argue — during the period when a winner is not officially declared — that the election was rigged. And Biden’s supporters, embittered, could make a similar argument if it appears that they lost.
A VOLATILE PERIOD AHEAD: With the coronavirus again out of control and with no stimulus bill on the horizon, the markets have plenty to worry about. We may not know the winner of the election until Thanksgiving or later, and charges of fraud may not subside; angry partisans on the left and right may never accept the final verdict.
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