There is a high probability that the U.S. elections this November are going to be a mess. There are a range of scenarios for market participants to consider that were once unthinkable. What happens if President Donald Trump loses and doesn’t concede? Or if challenger Joe Biden loses and doesn’t concede? Or if Trump again wins via the electoral college but not the popular vote, setting off civil unrest the likes of which the country has never seen?
Those aren’t the only scenarios. My personal favorite involves the counting of mail-in ballots, which are likely to set a record by far. Democrats generally lean toward mostly voting by mail amidst the pandemic, while Republicans tend to favor voting in person at polling stations. It is probable that Trump has a commanding lead on election night, which dwindles over the following weeks as the mail-in ballots are counted. Imagine what the political environment would be like under that scenario.
I have no particular call as to who will win the election, but as it pertains to markets, it is less about the outcome of the election and more about the process. For me, the issue with mail-in ballots isn’t the potential for fraud, it’s that they take so long to count. The world will laugh at the U.S. when Nov. 3 comes and goes and there is no declared winner — possibly for weeks.