Phillip Macro U.S Elections: Battleground states suggest trouble for Trump October 28, 2020 321

  • We think Biden is in a better position to win the presidency than Clinton in 2016Biden has consistently maintained a lead in national polls of over three points more than Clinton back in 2016. He also has better poll ratings in five out of the six key battleground states.
  • Florida has been a bellwether of U.S. electionsIn the past 14 elections, the candidate who won in this state won the presidential seat 93% of the time. We expect Florida to be a strong predictor again in this election.
  • Trump would need to secure at least 3-4 out of the six key battleground states to win the election. If he loses Florida, he has to win all five remaining battleground states to eke out a marginal win. Therefore, we expect Trump to lose the presidency if he loses Florida.

 

Introduction

Swing states, or battleground states, are states with close contests in the past few presidential elections. They may not exhibit traditional voting patterns and can be won by either the Democratic or Republican candidate by a swing in votes. Therefore, winning these states can decide a candidate’s chance of election.

 

Base case

In this year’s election, the main battleground states are Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin. The margin lead of the winning party here in 2016 was close to the margin of error in poll estimates, differing by only around 3 percentage points. This implies the votes may swing either way during the election.

These battleground states take up 101 electoral votes, which is around 18.8% of the total electoral votes. The biggest focus will be on Michigan, Pennsylvania and Wisconsin. These three have a strong historical record of voting for the Democrats but Trump was able to win them marginally by 0.3-0.7% back in 2016 (Figure 1). The 2016 results were 306 electoral votes for the Republicans vs. 232 for the Democrats. Without securing these three states with their 46 electoral votes, Trump would have lost the election. He would need to secure them again this year if he wants to get re-elected.

 

Biden in better position than Clinton in 2016…

Based on current national polls, Biden has consistently maintained a lead of over three points more than Clinton back in 2016. In recent weeks, his lead has soared to over five points, which bodes well for him (Figure 2). Part of the reason could be the damage to Clinton’s approval ratings from her email controversy, just 11 days before the election. Although Biden is targeted for a corruption scandal involving his son, we do not see such a great impact on his polls this year. If he is able to maintain his lead until election day, he should be in a better position to win the presidency than Clinton, in our view.

In the top battleground states, Biden had a 3.8-point lead over Trump as at 26 October 2020. Compared to Clinton’s performance in 2016, Biden has better poll ratings in five out of the six battleground states (Figure 3). The exception is Wisconsin. Back in 2016, Clinton lost Michigan by 0.3% and Pennsylvania and Wisconsin by 0.7%. With Biden’s better poll ratings, he should stand a better chance of winning Pennsylvania and Michigan. Wisconsin remains a wild card as Clinton lost the state despite her huge lead of 5.4 points in 2016.

 

Covid situation in battleground states

The U.S. is seeing a third wave of coronavirus cases, signalling a difficult winter ahead. States with a high risk of infections include Florida, Pennsylvania and Wisconsin. All three have positive rates of over 10% in the past seven days (Figure 4). This may threaten Trump’s polls going into election day. In states like Michigan and Wisconsin, total reported cases have almost doubled in the last two weeks. Amid the resurgence, Biden has extended his lead over Trump in Michigan and Pennsylvania. We expect the virus situation to worsen, given the White House’s focus on vaccines and treatments rather than virus control. New restrictions in Republican states may also be put on hold until after the elections, which could lead to an uncontrolled environment for virus surges.

 

Economic situation in battleground states

High-risk battleground states in terms of economic conditions include Florida and Pennsylvania. Florida’s virus resurgence in July delayed its economic reopening. This resulted in a huge surge in food-stamp participants till August (Figure 5). The figure is expected to remain high going into November, given the state’s phased economic reopening and a recent spike in cases. Pennsylvania’s unemployment rate as of September and percentage of renters behind rents remained higher than national averages. With economic woes weighing on these two states, Trump may have greater difficulty securing support from them. The two take up 49 electoral votes. Taking a leaf from the 2016 election, losing these two could mean losing the election for Trump, considering that Biden is a stronger contender than Clinton.

 

Florida a bellwether in U.S. elections

The state of Florida has been an accurate bellwether of U.S. election outcomes since 1964. In the past 14 elections, the candidate who won in this state won the presidential seat 93% of the time (Figure 6). The reason is, Florida takes up 29 electoral votes, the third highest of all the states. The only time it failed to predict the election outcome was in the year 1992, when Bill Clinton had already secured a huge margin lead by winning a 68.8% majority of the electoral votes. We expect Florida to be a strong predictor again in this election.

Average polls in 2016 were fairly representative of the final presidential results. Going into the 2016 election day, Trump had a 0.7-point lead over Clinton and eventually won in Florida by a 1.2% margin. That was partly because support for Clinton was severely dented by her political scandal 11 days before election (Figure 7). Today, Biden’s lead in Florida seems to be holding up well. If it continues, we expect Biden to have a marginal win in Florida.

 

Conclusion

There are six key battleground states in this election. We think Biden is in a better position to win the presidency than Clinton in 2016. Covid-19 resurgences and continued economic woes in some battleground states may be challenging for Trump. He would need to secure at least 3-4 out of the six to win the election. If he loses Florida, he has to win all five remaining battleground states to eke out a marginal win. Florida is thus shaping up to a key determinant again in this year’s election. If Trump loses Florida, we expect him to lose the presidency.

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Yeap Jun Rong
Research Analyst
Phillip Securities Research Pte Ltd

Jun Rong currently covers the U.S market, with focus on FAANG stocks. Previously an investment specialist, he constantly keeps in touch with the latest market trends to serve the needs of clients. Jun Rong also features in different media platforms such as Channel 8’s Morning Express show and provides market commentary for various newspaper like LianHe ZaoBao (联合早报) and Business Times. Jun Rong graduated from National University of Singapore (NUS) in 2017 with a Bachelor of Social Sciences with major in Economics.

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