"It is enough that people know there was an election. The people who cast the votes decide nothing. The people who count the votes decide everything."
-Joseph Stalin
Interestingly, the largest landslide that has ever been recorded in the United States was during the 1980 eruption of Mount St. Helens, a volcano in the Cascade Mountain Range in Washington State. In that landslide, some 2.9 cubic kilometers of the mountainside collapsed.
According to Wikipedia:
"A landslide, also known as a land slip is a form of mass wasting that includes a wide range of ground movements, such as rockfalls, deep failure of slopes, and shallow debris flows. Although the action of gravity is the primary driving force of a landslide to occur, there are other contributing factors affecting the original slope and stability."
In nature, landslides come in all different shapes and sizes. The same could be said for electoral landslides. The definition of an electoral landslide is "when a party receives an overwhelming majority of the votes or seats in an elected body, thus all but utterly eliminating the opponents."
The key question we are starting to struggle with internally is not whether Clinton will win the Presidency, but by how much and what are the broader implications. As an example, Senator Bernie Sanders going from the ranking member on the Senate Budget Committee in the minority is very different than him becoming the Senate Budget Committee Chairperson.
Back to the Global Macro Grind…
Unfortunately for Trump supporters and Republicans, the idea that Trump may have won the debate last night is all but a moot point this morning. By cagily responding to the question of whether he would accept the results of the election and leaving that in question, Trump has set the global newspaper headlines this morning and they aren't supportive of him, specifically:
- Above the fold in the New York Times, "Trump Won't Say If He Will Accept Election Results";
- Above the fold in the Wall Street Journal, "Trump Wavers On Accepting Result"; and
- Top headline on USAToday.com, "Trump Flip-Flops, Refuses To Say Whether He Will Accept Election Results."
Whether you think the media is biased or not, those are the top headlines in the largest newspapers in America. So the fact that Trump may have won a few more debate points this go-around is largely irrelevant as the Democrats will not be comparing him to the likes of Joseph Stalin for the remainder of the election.
Meanwhile three short weeks before the election, prominent Republicans will once again have to disavow themselves from a Donald Trump offhand comment. This ain't good folks.
As the race stands today, according to the Real Clear Politics poll aggregate, Clinton is at 48.6 and Trump is at 42.1, so Clinton has a lead of some +6.5 points. According to fivethirtyeight.com this gives her a probability of around 85% of winning. Over the past few days, the race has narrowed ever so slightly, but no doubt it will widen again in Clinton's favor as new polls are taken after last night's debacle.
Interestingly, four years ago today Obama was only up about a point on Romney with a 47.7 to 46.7 advantage. That race was close for most of October, staying within a point or two in most aggregates. Obama eventually won by about +3 more points than the poll aggregates predicted he would win by.
There are two key differences in polling this year versus four years ago. First, at this point in the election four years ago, the Undecided vote was about 5 points, while this year the Undecided vote is still at about 9 points. Secondly, this year the mathematical range of the last 10 major polls is 14 points, while four years ago it was around 5 points at this point in the election.
The implication of the two points above is that the range of outcomes remains much broader than in almost any recent modern Presidential election. There is a view that Trump may actually do better than expected because of something called the "Bradley Effect", which suggests that when polled respondents may respond according to a social desirability bias.
In effect, since it less socially acceptable to admit you are voting for Trump, when asked the question by another human the respondent may be biased to offer a deceptive answer. As a result, the polls may be skewed, falsely, towards Clinton. There may be credence to this, but there is also another scenario that we think could be becoming increasingly likely, which is that Clinton wins by a landslide.
On a very basic level, if we ceded Clinton her current +6.5 points but then also give her the Obama poll outperformance of +3 points, she will win the popular vote by some +9.5 points over Trump. In that scenario, it will be an almost foregone conclusion that the Democrats will win the Senate (as the Chart of the Day shows the odds of this are already high).
In a Clinton landslide scenario, the more interesting question will be the House. Almost every pundit, on both sides of the aisle, has long held that the Republicans will hold the House. This is largely based on the fact that Democrats would need to turn 30 Republican held seats to win the House, which is unlikely except in a Clinton landslide scenario.
Going back four years ago, Obama's +4 point victory over Romney allowed the Democrats to win in 28 districts currently held by Republicans. Now, a lot has changed in four years, including redistributing, but the most widely held consensus view remains that the Republicans will hold the House, but as they say "all statistics have outliers". Which begs the question: is the outlier that markets may be mispricing the idea of a Democratic clean sweep?
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.59-1.80%
SPX 2118-2151
VIX 12.99-17.49
EUR/USD 1.08-1.11
Oil (WTI) 47.72-51.96
Gold 1
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research
