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In September, election risk came to the fore with President Trump refusing to commit to an orderly transition of power while casting doubt on the legitimacy of mail-in ballots ahead of the first round of debates. Developments since the end of September, in particular President Trump’s admission to Walter Reed hospital after testing positive for COVID-19, have further increased uncertainty surrounding the election.
This month we review market action in the weeks following the Bush-Gore election in 2000 as a guide to what may happen in the event of an uncertain or contested election. In that contest, on November 8, 2000, victory in Florida was declared in favor of George W. Bush with a margin of victory of only 1,784 votes. This triggered a statutorily-mandated recount that saw that margin decline to a mere 327 votes. A legal battle ensued regarding whether time consuming manual recounts would be allowed and through what date, with the Supreme Court of Florida ordering a manual recount on December 8, only to be overruled by the Supreme Court of the United States on December 12, a mere two days after hearing oral arguments.
With the use of mail-in ballots expected to rise significantly in response to concerns over the risks of a spread of COVID-19 in connection with in-person voting, President Trump is already beginning to cast doubt on the legitimacy of this year’s election by attacking mail-in ballots as susceptible to fraud. We look to the Bush-Gore election for guidance on how markets may respond to a contested election result next month.