The political calendar of 2020 has been jam-packed with events that have moved the futures market. Impeachment hearings, primary season, conventions, and debates have all been key happenings in a historic electoral cycle. In this blog article, we’ll assess the market dynamics ahead of Election Day 2020.
Events Reshaping the 2020 Election
At the beginning of the year, U.S. financial markets were humming along, with record-setting stock market valuations leading the way. The strong economy seemed likely to be a key focus for politicians running for office in 2020. Then the dynamic shifted dramatically. COVID-19, soaring unemployment, and social unrest upended normal life and brought a different set of social, political, and economic discussions to the forefront of public debate.
By July, many financial indicators had bounced back from their March lows, but a new level of uncertainty entered the markets as concerns grew about how swiftly the U.S. economy would recover when faced with new COVID-19 outbreaks in different areas of the country.
Going into the November election, every savvy futures market participant should keep these two factors in mind when assessing risks and predicting likely market behavior:
- U.S. equities experienced an unprecedented challenge from COVID-19. Intermediate and long-term impacts may be immeasurable.
- Historically, presidential incumbents are sometimes not re-elected to a second term. The last president to serve only one term was George H. W. Bush (1989–93).
It’s also important for active traders to be ready for as many contingencies as possible. And a potential Democratic victory in the presidential election is only one such contingency. Another one to consider is how Congress will look in 2021.
The Congressional Battleground
Futures market participants will be closely monitoring which party secures the Senate majority in November’s general election. Will the Senate shift from a Republican majority to a Democratic majority in 2020? It’s possible, if Democratic candidates are successful in enough of the following races:
| State | Republican | Democrat | RCP Projections |
|---|---|---|---|
| Colorado | Gardner | Hickenlooper | Lean Democrat |
| Arizona | McSally | Kelly | Lean Democrat |
| Maine | Collins | Gideon/Sweet/Kidman | Toss-Up |
| North Carolina | Tillis | Cunningham | Toss-Up |
| Montana | Daines | Bullock | Toss-Up |
| Kansas | Kobach/Marshall | Bollier | Lean Republican |
| Iowa | Ernst | Greenfield | Toss-Up |
| Georgia | Loeffler/Collins | Warnock/Lieberman | Lean Republican |
Note: As of this writing, party nominees in some races have not been determined.
The Senate currently has 53 Republicans, 45 Democrats, and two Independents (who caucus with the Democrats). To gain outright control of the Senate, Democrats would need to gain four seats. They would also have effective control if they gain only three seats and Biden wins the presidency, because the vice president casts the deciding vote in case of ties in the Senate.
A shift of power in the Senate would be significant because Democrats are likely to retain their control of the House of Representatives, where they currently fill 233 of the 435 seats. House incumbents typically enjoy many advantages, including better name recognition and greater funding than challengers. In recent years, incumbents have won reelection at a near-90 percent clip.
Want to Learn More About How Politics Impacts Futures Market Performance?
As a general rule, markets hate uncertainty. And the general election of 2020 is bringing plenty of uncertainty. The outcome of the 2020 election may significantly influence futures markets, depending on perceptions of how federal economic and monetary policies may shift. Retail and institutional investors may either increase or decrease their appetite for risk, which could have a positive or negative impact on markets.
To learn more about how politics is currently affecting the futures markets, check out Daniels Trading’s Insider Market Advisory. Featuring trade analysis, outlooks, and timely info, it’s an invaluable resource for the active futures trader.
