The UK media loves battles. However, they really are scraping the bottom of the barrel (or Channel) these days. Of course, the Viagra-by-Video readers of the Daily Mail and the Spitfire Brexiteers loved the thwarting of a tanker hijack by the Special Boat Service(SBS) earlier this week. Even better, if there is footage of night-vision goggles, 40 commandos, ropes, rapelling, choppers, high seas and thermal imaging to accompany a “Storm the Andromeda!”  headline and a swift 9 minute victory for “ruthless, military precision”. But before Elgar’s wind section could strike up a triumphant Rule Britannia soundtrack one tiny detail emerged which slightly changed the tenor of the threat faced.

Apparently the 42,000 ton tanker was under threat from seven desperate stowaways who had smashed some glass and threatened to kill the crew if they were locked in their cabins. No bombs, no chemicals, no AK47s, no knives, just desperation and incredibly poor timing – the huge tanker was just passing the Poole HQ of the SBS. Indeed, the one-sided nature of the battle did remind me of Captain Blackadder in the WW1 trenches pining for earlier British campaigns “where the kind of people we liked to fight were two feet tall and armed with dried grass.” While we can laugh at this fictional wish for an easy victory the thought of the same in the context of the US election is far more serious and threatening for both the domestic media and the Republican side.

The prevailing narrative right now is that Joe Biden is winning by a big margin(8- 10 points) but that the gap is closing and currrent polling is failing to capture the “hidden” bloc of Trump voters which delivered victory in 2016. I might be presenting myself as a hostage to voting fortune here but I’m racing towards a non-consensus view that the election will be a landslide delivering not just the White House to Democrats, but also the Senate. Predictable wins don’t provide ‘drama’ or viewers for the media and Republicans still need their voters to turn up and avert a Senate disaster. “Loser” is a uniquely American insult and explains why the perception of a tight battle is essential to motivate voters on the probable losing side. Why probable? Here’s a few data points…

In the 2016 election 138 million votes were counted out of 250 million eligible voters. That’s more than 100 million voters who didn’t show up.

 Early voting tallies are staggeringly high. Already, there are close to 75 million votes cast which is more than 50% of TOTAL votes in 2016 and more than the 63 million won by Trump.

 Texas early votes are now heading towards 90% of total 2016 votes. Dawson County in Georgia is already over 100% of the 2016 total.

 Latest polls from “swing” state Wisconsin put Biden a whopping 17 points ahead of Trump.

 At current voting rates there will be a turnout of close to 65% which would equate to more than 160 million votes cast. That’s 22 million more votes than a 2016 national total which Democrats actually won by 3 million votes.

Boat parades, super-spreader rallies and millions of “hidden” Trump votes strike us as more Blackadder than Bloomberg. The data does not lie and we referenced Wisconsin deliberately. A Trump win by a tiny 22,000 votes in 2016, the state is now in the grip of an acute Covid-19 crisis, desperate mail voter suppression by its state Supreme Court and economic challenges. The pandemic is not just killing Americans in record numbers, it is killing consumer confidence and the GOP in many swing states. To add insult to pandemic injury, China has won the trade war(US farmers and Wisconsin lost) and has returned to relative economic normality. America hates losers. However, do not assume a Biden landslide is a “win” for Democrats …..or financial markets.

Clearly, an undisputed win for Biden will avoid a constitutional crisis but an extreme winning margin could create serious social unrest among shocked GOP voters fed a daily diet of “winning” from Fox, Breitbart and OANN broadcasting platforms. Also, markets can behave in very counter-intuitive ways despite perceived political positives.  The excellent John Authers touches on that point this week in his Bloomberg article, “Trump Was Great For Mexicans, Terrible For Coal”.

Yes, coal and oil stocks have had a horror Trump show but the Mexican peso, cash flows south of the border and trade(NAFTA re-jig) have gone well. Also, the technology sector would hardly be considered close to the hearts of the MAGA cult but has boomed. However, consider this a collector’s item; this column would not hold Trump responsible for these outcomes. Structural trends and capital flows don’t really run on Presidential cycles. So consider the following two structural trends as likely headwinds for markets in a Biden administration:

  1. China geopolitics/trade – there is an unusually bi-partisan view in Washington that China is a threat which must be confronted. Trade has been the initial salvo in this confrontation but digital(internet) decoupling is very much a possibility as data security grows in criticality and follows Huawei and Tik Tok headlines.
  2. Google is already facing the biggest antitrust case in a generation but might be only the opening act in a global political move to challenge the supra-sovereign power of Big Tech.

The technology sector is potentially in the cross hairs of both structural risks above and currently accounts for 25% of the S&P 500 by weighting. We don’t have any crystal balls but change can spook markets. Narrow political wins rarely achieve much change, ask Donald. A landslide Biden victory will bring its own pressures for change. Think of five “T’s; taxes, technology, trade, temperatures(climate) and treaties. The final one is a bit cryptic but might be the most divisive and explosive.

By treaty we don’t just mean sovereign treaties between nations. We mean a legal framework for multiple citizens within a nation, like say…. The US Constitution. Trump and William Barr, his Attorney General, have trampled all over it. The Supreme Court is now in “originalist” conservative hands thanks to a Senate with an outdated composition. As things stand, North Dakota with a population of less than 1 million has the same number of Senator representatives as California with 40 million. Landslide elections can signal a societal backlash, and big change. Watch the voting turnout, not Fox news or even financial markets.