Rolling coverage of the latest economic and financial news
- Introduction: All eyes on US election
- Dow jumped 423 points on Monday amid stimulus hopes
- European open: FTSE up 79 points
John Hardy, head of FX Strategy at Saxo Bank, warns there could be ‘considerable volatility’ as the US election outcome becomes clear… particularly if the result is contested.
Finally, it is U.S. Election Day, and although many official pollsters suggest very high odds of a Biden victory and the Democrats retaking the U.S. Senate, there are sufficient doubts on the outcome to make the election results a surprise to many.
A contested election result tonight is rightfully seen as the most negative scenario, as it could drag out the uncertainty for weeks or longer.
There are 35 Senate seats up for election today, and those battles will have a huge impact on whether a major stimulus package can be agreed quickly after the election.
The Republicans currently have a 53-47 majority (plus Mike Pence’s casting vote). Twenty three of their seats are being contested today, versus 12 Democrat-held seats, so the balance of power could shift.
While the House of Representatives is seen as an incredibly likely win for the Democrats (97% in the FiveThirtyEight Model), their chances in the Senate stand at a noticeably lower 74%, so there remains the possibility that we could get a Republican Senate alongside a Biden White House. Indeed, our US economists view that as the most negative outcome for growth next year, because Republican senators would likely remain resistant to a big fiscal package, as they’ve already done in recent weeks even with Mr. Trump in the White House. This contrasts with their view on a Democratic sweep of the presidency and both houses of Congress, which they see as providing the most fiscal stimulus to the economy next year. So it’s clear that control of the Senate will be critical to the policy mix we can expect to see in 2021.
Currently the Senate is split 53-47 to the Republicans, and in the event of a 50-50 tie, the Vice President casts the deciding vote. So that means to win control of the chamber, the Democrats would need to take a further 3 seats if Mr. Biden wins the presidency, and 4 seats if President Trump is re-elected. With Democrats likely to lose a seat in Alabama, the five key races to watch for Senate control will be in Arizona, Colorado, Iowa, Maine and North Carolina. It’s also worth noting that in Georgia, one of the races is a special election in which numerous candidates are running from both parties (no primary election took place) and none are expected to get the 50% + 1 votes needed to avoid a runoff under Georgia rules. The other Senate race in the state is also very close, with a chance of a third-party candidate keeping the winner under 50%, triggering a runoff as well. Those runoffs wouldn’t take place until January 5, so in the event that control of the Senate were not clear, then majority control could come down to runoff elections in a single state in January.
Related: US Senate elections: the key races that will determine power in Washington
