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Next steps in the US election – could stability be on the horizon?

A timeline of important events for investors.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

George Trefgarne

Published on 18 November 2020

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

To British eyes, the thought of not officially knowing who the next US President will be more than a week after the election might seem strange. In the UK the winner is known the following morning and the next Prime Minister kisses the Queen’s hands around lunchtime.

It is important to understand that the uncertainty in America is not, at this point, anything unusual.

Unlike in the UK, when people vote, they are actually voting for a group of people called electors. The number of electors each state gets is equal to its total number of Senators and Representatives in Congress. A total of 538 electors make up the Electoral College. Each elector casts one vote following the general election. This year it will take place on 14 December.

The other key dates to watch are:

8 December 2020
This is the day by which states are supposed to have resolved disputes.
14 December 2020
The day on which states must declare their votes in the 538 strong Electoral College to choose the next President.
3 January 2021
The new Congress is sworn in.
6 January 2021
Congress formally counts the Electoral College votes. So-called ‘faithless electors’ may emerge, Electoral College voters who use their discretion to ignore their states’ instructions. This is only possible in some states and would be highly unusual and has never changed the outcome of an election.
20 January 2021
The day by which, under the Constitution, the previous Presidency expires and the new one is inaugurated at a ceremony in Washington.

What does a Biden presidency mean for the stock market?

Is the race won yet?

While Joe Biden has been projected to win the race to become the 46th president of the US, it’s not official just yet. There are also questions on how far Trump’s legal challenges will go.

For example, in 2000 it took over a month for the Democratic candidate Al Gore to surrender the Presidential election to George W. Bush. After numerous legal disputes and recounts in Florida, he did not concede until 13 December.

The first hurdle is to get through all the calls for recounts. The rules on recounts vary by state. In Pennsylvania, the vote must be within 0.5% and then a recount can be requested. Biden, the Democrat candidate, won by more than 49,000 votes, or 0.73%, so it would be a big surprise if Donald Trump’s dispute got very far.

By contrast, the vote in Georgia is so tight that the margin is only around 0.3%. State officials have said there is going to be both a recount and a rerun of the two-seat Senate race. No candidate got over the required 50% threshold.

When states have completed their processes, they officially certify their results. This is done by the chief election officer, Board of Canvassers or the governor.

At a federal level, an executive committee called the General Services Agency has to certify the result to allow the ‘transition’ to begin. So far, that has not happened, which has infuriated some Democrats.

In theory, Inauguration Day is the hard stop day by which everything must be sorted out, but it should be well before then.

Biden has remained calm and urged everybody to do the same, having described Trump’s failure to concede as “embarrassing”. Receiving 77.4m votes (as of 13 November and counting is still going on), he is more than five million ahead in the popular ballot. He believes the margin between him and Trump in the critical states, is big enough to not be overturned by any number of recounts or lawsuits.

“There is only one President at a time, he’s President,” said Biden “We are going to have the Electoral College make their judgement in December. It will be announced in early January.”

What does this mean for investors?

Before the election, there was a concern that the outcome would be close. With civil unrest from the Black Lives Matter protests, lawsuits and recounts, there were fears some sort of ‘civil war’ might have erupted. So far, that has not happened.

Democracy seems to be working as it should do in the world’s largest economy. This is a relief. The conclusion of the most emotive election for years is a moderate Democratic President. Biden will likely have to defer to a Senate controlled by the Republicans (depending on the result in Georgia) and a House of Representatives where the Democrats have a small majority.

In other words, both sides in Washington will have to compromise to get anything done – including the passing of any stimulus bill for the economy. It will be noisy.

With this in mind, millions of people actually voted Democrat for the White House and Republican in Congress. You could argue that a more moderate opinion has asserted itself, which can be no bad thing, either for the United States itself or for investors.

George Trefgarne is CEO of Boscobel & Partners, a political consultancy. Hargreaves Lansdown may not share the views of the author.

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