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US Election Playbook: What You Need to Know Ahead of the US Election

US Election Playbook: What You Need to Know Ahead of the US Election

2020-11-03 10:30:00
Justin McQueen, Analyst
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US Election Analysis & News

  • US Election Timeline
  • US Election Scenario Analysis
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US Election 2020 Timeline: Earliest Possible Release of Polling Results

*Time in GMT

US Election Playbook: What You Need to Know Ahead of the US Election

2016 Release of Results

US Election Playbook: What You Need to Know Ahead of the US Election

One caveat to note is that given coronavirus, there has been far greater requests for mail-in ballots, which in turn has raised the importance of them leading to some to raise expectations that results may not be known in the days and potentially weeks after the election date. That being said, timings of results could notably differ from 2016.

US Election Playbook: What You Need to Know Ahead of the US Election

National Polls Maintain a Healthy Lead for Biden

US Election Playbook: What You Need to Know Ahead of the US Election

Key Battleground Polling Shows a Tighter Race

Key Battleground Statistics

  • Ohio has the longest win streak in voting the presidential winner since 1964. No Republican has won the election without winning Ohio.
  • Florida has a win streak since 1992. Last time a republican won the election without winning Florida was in 1924. Florida also dubbed the ultimate battleground.
  • Arizona has only voted for Democrat once (in 1996) since 1952.
  • Pennsylvania is among the key blue wall states (Michigan & Wisconsin) that Trump won in 2016 by a 0.7% margin
  • With the exception of Ohio, election polls continue to show a healthy lead for Biden in key battlegrounds
  • The handling of Coronavirus has been a key vocal point ahead of the US election. As such, key states with a high number of COVID fatalities relative to population size will be watched closely as to whether this impacts voters decisions.
US Election Playbook: What You Need to Know Ahead of the US Election

USD Shorts at Extremes Ahead of US Election

In recent times, aggregate USD shorts have not been this extreme ahead of a US election. That said, as the risk environment becomes less constructive amid the resurgence of virus cases, while US election uncertainty also picks-up. A floor in the short-term looks to be in place for the greenback as investors begin to unwind their bearish positions.

Macro drivers will dictate what type of USD short squeeze occurs with a position clear-out either offering investors to reload shorts or flip net-long.

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US Election Playbook: What You Need to Know Ahead of the US Election

US Election Scenario Analysis

US Election Playbook: What You Need to Know Ahead of the US Election

The Last Contested Election

Contested Election = Worst Case Scenario for Risk Asset

  • A contested election could see a 5% drop in the S&P 500, much like in 2000, while the USD pushes higher.
  • That said, expectations to find a definitive winner would likely follow a similar timeline to what had been witnessed in 2000.

Timeline of Events During 2000 Election

  • Nov 7th: US Election Results are Too Close to Call
  • Nov 26th: Bush Declared Winner of in Florida by Secretary of State
  • Dec 12th: US Supreme Court Votes in Favour of Bush
US Election Playbook: What You Need to Know Ahead of the US ElectionUS Election Playbook: What You Need to Know Ahead of the US Election

VIX Trading Around the US Election

Over the past 7 elections, the VIX has tended to pick-up the month ahead the election before tailing off after the event. The 2016 election saw a steep rise in the VIX ahead of the election, however, the volatility gauge did fall quicker.

The 2000 Election had been an exception to the typical reaction given that this was a contested election. In turn, the VIX remained elevated for the weeks ahead. In the current climate and unique circumstances, the risk of a contested election has been heightened. In such a scenario, the VIX would likely follow the 2000 reaction more closely.

As shown in the chart, the VIX is following its typical rise into the election. An outcome which replicates current polling for a comfortable Biden victory would see a material shift lower in the VIX, allowing equities to push higher into year-end.

US Election Playbook: What You Need to Know Ahead of the US Election

For a PDF of the US Election Playbook, click here

How Will Markets React to the 2020 Election?

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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