Economic Weekly: US election: Clear result could still be on the cards

There are a few bits and pieces of domestic data out this week, but there’s really only one game in town: the US elections. After an eighteen-month campaign, the wait is nearly over, as we look to find out whether President Trump will spend four more years in the White House, of whether he’ll be defeated by his challenger, Joe Biden. The results will trickle in from around midday Wednesday NZT onwards, but how soon we’ll know the outcome will depend on how close things end up. If it’s a landslide, that should be apparent on the night, but with an unprecedented number of votes-by-mail that will take a while to count, we might be waiting a while longer if its closer. That means it’s important to be careful when reviewing the returns – Reuters warns of a ‘red mirage’, with early returns favouring President Trump’s Republican Party, before mail-in ballots favouring Biden’s Democratic Party come in.

A drawn-out result could trigger considerable volatility everywhere from bonds and equities to commodities and FX. With President Trump refusing to commit to accepting defeat, and the prospect that things could end up in the courts, it’s not at insignificant risk. The last time we had an unclear result, back in 2000 (Bush v. Gore), there was quite a lot of choppiness on Wall Street, which in turn led to volatility on the NZX (see chart below). Still, we shouldn’t overestimate the chances of an ambiguous result – there is a good chance of a clearer outcome.

Indeed, the most likely outcome is still a comfortable win by Biden. Everyone remembers the shock in 2016, but there are a few reasons to believe an upset this time is a bit less likely. Biden’s lead is wider than that enjoyed by Hillary Clinton three years ago (and ahead of the margin he probably needs to win America’s convoluted electoral college system). The polls have been much more stable this year too, with some pollsters and modellers also adjusting their methods to fix things that went wrong last time – like the failure to weight their samples by education, or account for correlations in errors between states. The Democrats are also (widely) favoured to hold onto the House of Representatives and (more narrowly) favoured to win control of the Senate. Remember that whatever happens, the new President and Congress won’t be sworn in until January, so the prospects for a new stimulus bill any time soon are still far from certain.

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Jane Turner

Senior Economist

Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008.  As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts.  In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.   

During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy.  Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors.  She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.

Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand.  Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours.  In 2014, she took a career break from ASB to travel the world and learn to snowboard.

Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.

Mike Jones

Senior Economist

Mike joined ASB in 2019 armed with almost 15 years of experience in applied macroeconomic and financial markets analysis.

Mike's career has been all about distilling the risks and opportunities of economic and financial market trends for business. Basically asking the "what does it all mean" question. Mike's enthusiasm and skill for drawing out practical, commercial insights from the murky world of economics has been honed over a relatively broad base of experience.

After spending the early part of his career on the tools at the Reserve Banks of both NZ and Australia, Mike had a lengthy stint at BNZ where he was NZ’s top-ranked currency strategist. His regular and topical macro research also saw him pick up several FX forecast accuracy gongs from Bloomberg.

Drawn in by the prospect of putting strategy into practice, Mike moved from Wellington to Auckland in 2013 to join Fonterra as GM Treasury Risk Management. In this role, Mike lead Fonterra’s macroeconomic research output, and was responsible for the strategy and execution of Fonterra’s foreign exchange, debt, and interest rate hedging programmes.