As Nov. 3 quickly approaches, the Presidential Election seems to make it into every conversation — personal and professional. Similar to 2016, we believe the polls are not accurately portraying a close race. Blast from the 2016 past: Clinton had a 90% chance of winning. The Presidential election race is much closer than experts forecast, largely because the data is coming from analyzing Twitter comments.
Both sides are questioning the polls. Joe Biden’s presidential campaign manager even warned that the national poll numbers were “inflated” and that their internal polls showed the race to be much closer than is being reported.
The Heart of Polling
The primary goal of polling is to anticipate voter turnout. In today’s environment, that endeavor is as much art as it is science. There are many reasons to why voter turnout has such a unique outcome.
First, the current polling methodology is oversampling Democrats. GWS believes there is core group of individuals who are not easily counted. They tend to be socially conservative and middle of the road blue-collar. These voters tend to align with unions when it comes to economic policy and conservatives when it comes to social policy. The complication is when a populous message is on the Republican ticket. President Trump’s economic policy is viewed favorably by these individuals.
Second, there is an oversampling of women. Women tend to vote more often than men and they are more likely to vote Democrat. However, this year enthusiasm for Trump may create a 50/50 M/F turnout. Lastly, many polling agencies are expecting a high turnout similar to 2012. When you widen turnout to register voters, you increase the number of Democratic voters (historically).
All the above indicate a tilt towards Trump. But there is also a group that appears to be moving Biden’s direction. This is especially problematic for Trump when we look at battle ground state demographics (see below).
Non-Poll Indicators
It is not just the polls suggesting a tighter race; there are also Non-Poll indicators showing a tighter race and/or a possible lead by Trump. The indicators are rally attendance and registered voters. Trump has a significant lead when it comes to attendance for rallies over Biden. It remains to be seen how much COVID plays into this. Also, Republicans lead in registered voters. JP Morgan's top quant Marko Kolanovic wrote an interesting note, in which he said that clients have been asking him "what data in addition to polls are available to assess possible US election outcomes in various states."
Stimulus & COVID-19
Fiscal stimulus is waning in news headlines as the public renews its optimism for a pre-election deal. McConnell is willing to put any bipartisan compromise up for vote in the Senate. However, there are still a myriad stumbling blocks, including Senate Republican opposition. Also, Pelosi outlines a 48-hour deadline to pass a relief bill before the election.
The United States continues to see a rise in COVID cases, but the highest numbers are still in rural counties, specifically in the Midwest.
The European Union recently surpassed the United States in cases and is quickly gaining relative to deaths. Sweden’s historical data is all of a sudden different, so we are actively monitoring for patterns and will report back.
The World Health Organization has been working this week to clarify its stance on pandemic lockdowns after one of its officials acknowledged the negative economic consequences such measures can bring.
The Economy, Market & Money Supply
Retail sales, a measure of purchase at stores, restaurants and online, rose a seasonally adjusted 1.9% in September from the prior month, the Commerce Department reports. The benchmark 10-year note yields rose to 0.744% on the retail sales data. The yields have traded in a tight range from 0.50% to 0.80%. The producer-price index increased 0.4% from a month earlier after a 0.3% gain in August, the Labor Department reports. The PPI also climbed 0.4% year-over-year, the first positive reading since March. Food costs were the biggest driver of the upward climb, rising 1.2% MoM and plus 13.3% YoY. Mortgage Rates Set Yet Another Record Low. Homebuilder sentiment beats, hits a fresh record: The October NAHB housing market index rose two points to 85, passing previous record of 83 first set in September.
Earnings beat the rate above trend, but the reaction to early reporters suggests the bar is higher.
Thirteen-week annualized money supply (M2NSA) growth is showing another decline. Over the last week, it has dropped from 15.1% to 13.0%. And this is far, far, far from the early July growth peak of 62.7%. Absolute monetary growth was up this week which is certainly an indication of Fed monetizing of Treasury debt. But this pump, as can also be seen by the chart, has been quite inconsistent, probably because of limited, conservative bank lending activities outside of the housing markets.
---
If you have any questions, please contact your Lead Advisor or any other member of our team. We are here for you.
Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.