The Big Picture
It is not a long time between now and November 5, but we venture to guess that it might feel like an eternity for the market.
What is so meaningful about November 5? That is the first Tuesday in November, which means it is Election Day. We can only hope that there is a clear-cut outcome that night in the race for president.
There is some writing on the wall, however, that suggests that might not be the case. That writing is all over the polling data.
And the Nominee Is...
Briefing.com does not take positions in the market, we do not manage money, and we do not hold a political bias. Never have and we're not about to start now.
Party loyalists have their reasons for favoring their candidate, and time will tell that independents have their reasons, too. We know for certain that former President Trump is the Republican nominee for president and that Senator J.D. Vance (R-OH) is the Republican nominee for vice president.
Until a week ago, President Biden and Vice President Harris were going to be the Democratic contenders. That all changed after President Biden dropped out of the race, bowing reportedly to party pressure to do so. In conjunction with that decision, he endorsed Vice President Harris for president.
An endorsement is not a nomination, but it is looking highly probable that Vice President Kamala Harris will be the Democratic Party's nominee for president. Who her running mate will be is still very much up in the air.
The Democratic National Convention is going to be held August 19-22 in Chicago. A formal nomination process will take place there.
Pollsters, understandably, are not waiting for that formal process to be conducted. Heck, they were already measuring voters' feelings about a Trump-Harris matchup before President Biden dropped out of the race.
That is no longer hypothetical. Their canvassing with respect to the presidential race now revolves squarely around voters' positions/feelings about former President Trump and Vice President Harris.
Don't Forget about Congress
RealClear Politics does an excellent job of aggregating the polling data. Readers should bookmark their page to stay on top of the polling data, which also includes key insight on Congressional races.
The battle for control of Congress also has the makings of being a tight race based on the latest polling data. While the presidential race will command most of the media's attention, the Congressional vote should not be overlooked.
A presidential candidate can make a lot of claims about what they are going to do in office, but turning their fiscal policy into law requires legislation that is the domain of Congress.
It becomes a lot harder for a sitting president to get major fiscal policies enacted, as they envision, if their party does not control both houses of Congress. Conversely, the path to approval becomes easier when they have a mandate (i.e., their party controls both houses of Congress).
This is worth noting, knowing that the tax cuts enacted in 2017 under the Trump Administration expire at the end of 2025.
Currently, Democrats hold 47 seats in the Senate, Republicans hold 49 seats, and Independents, all of whom caucus with the Democrats, hold four seats. For all intents and purposes, then, the makeup is viewed as a 51-49 split in favor of the Democrats. The vice president casts any tie-breaking vote in the Senate.
There are 34 Senate seats up for election on November 5. Most of those seats are deemed "secure," which is to say the incumbent, or the candidate for the party currently holding a Senate seat, is widely expected to win their election. Seven races, though, are considered to be a toss-up, and all of those seats (Arizona, Michigan, Montana, Nevada, Ohio, Pennsylvania, and Wisconsin) are currently held by Democrats.
In the House of Representatives, all 435 seats are up for election on November 5. The current composition of the House features 220 Republicans, 212 Democrats, and three vacancies, so a slight majority for Republicans.
According to the nonpartisan Cook Political Report, 193 Republican seats are considered to be solidly Republican in the coming election, nine more seats are likely to favor Republican candidates, and eight races are apt to lean Republican.
On the Democrat's side of the aisle, 173 seats are deemed to be solidly Democrat, whereas 16 more seats are likely to favor Democrat candidates, and 14 races are apt to lean Democrat.
That leaves 22 seats that are considered to be toss-ups where either party has a good chance of winning.
An Important Margin of Error
In terms of the presidential polls, 19 polling results have been released since July 5. According to the aggregation by RealClear Politics, former President Trump came out ahead of Vice President Harris in 13 of them; meanwhile, Vice President Harris came out ahead in four of them, two of which were conducted before President Biden had dropped out of the race. The two presidential candidates were tied in two of the polls.
The edge former President Trump had over Vice President Harris exceeded the margin of error in five of the polls. In the four polls giving an edge to Vice President Harris, her spread over former President Trump was equal to, or less than, the margin of error in each of them.
**RV = registered voters
**LV = likely voters
Altogether the latest aggregation of polls conducted between July 5 and July 24 show former President Trump leading Vice President Harris by an average of 1.9 points. The average margin of error for the polls is 2.7.
In other words, the average lead former President Trump has over Vice President Harris is within the average margin of error, meaning it might not be a lead at all -- or it could be an even bigger lead than it appears.
The takeaway point is that it is anyone's guess, which is to say there is ample uncertainty at this juncture about the outcome of the presidential race, which could even be swayed by the presence of Independent Robert F. Kennedy, Jr., although he is currently on the ballot in only nine states.
What It All Means
How many times have you heard that the market doesn't like uncertainty? How many times have you heard that the market has the ability to climb a wall of worry? Probably too many to count. Life is inherently uncertain and yet the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 all hit record highs earlier this month.
This political uncertainty -- not to mention the geopolitical uncertainty -- is a bit of a different animal, because elections dictate the path of policymaking.
There promises to be ample political drama between now and November 5, and maybe even after November 5. Part of the drama each week will be the latest poll results related to the presidential race.
The market has preconceived notions about who would be the more market-friendly candidate, but of course the market isn't Republican or Democrat. Rather, it is comprised of Republicans, Democrats, Independents, Libertarians, Greens, and the politically disinterested.
Accordingly, there will be reasonable theories as to why the market, and certain industry groups, are moving one way or the other on the latest polling data.
If former President Trump and Vice President Harris are both unable to escape the confines of a lead that is within the average margin of polling error, the market seems unlikely to be able to escape the uncertainty associated with that dynamic.
It is not a long time between now and November 5, but there is a lot of political wood to chop between now and then, which is why the market is apt to remain choppy in the interim as it follows the bouncing polls in a tightly contested race.
