Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

It is Nov. 4, a day after the U.S. presidential election, and Joe Biden has just won a narrow victory. Or has he?

Donald Trump alleges fake mail-in ballots cheated him out of a win. Republican-controlled legislatures in Michigan, Wisconsin and Pennsylvania refuse to accept the election-night counts in their states. The Republican Party files suit to prevent certification of the election results.

The U.S. Supreme Court tries to remain aloof and avoid having to decide yet another presidential election, as it did in 2000 following disputed vote results in Florida. However, massive street protests finally convince the court it must act. As the justices ponder, government grinds to a halt. Armed militias prowl Washington.

Story continues below advertisement

This ugly scenario was one of several explored in a recent “war games” organized by the Transition Integrity Project, a non-partisan group created by Rosa Brooks of Georgetown University Law Center and Nils Gilman of the Berggruen Institute, a Los Angeles-based think tank.

The participants in the war games included Democratic and Republican political operatives, as well as constitutional lawyers and journalists. Each was assigned to play a role. Some represented the Biden campaign, others the Trump campaign. Still others took the places of elected officials, courts and other key players.

Their job was to explore how each of these key groups might plausibly act in four scenarios – a too-close-to-call outcome on election night, a Biden landslide, a narrow Biden victory, or a situation where Mr. Trump wins the Electoral College but loses the popular vote by an even wider margin than in 2016.

state of the nation: no satisfaction

Percentage of Americans who say they are satisfied/

dissatisfied with the way things are going

in their country today

87

Dissatisfied

68

68

32

31

Satisfied

12

2017

2018

2019

2020

Most recent survey of U.S. adults conducted June 16-22, 2020

JOHN SOPINSKI/THE GLOBE AND MAIL

SOURCE: pew research center

state of the nation: no satisfaction

Percentage of Americans who say they are satisfied/

dissatisfied with the way things are going

in their country today

87

Dissatisfied

68

68

32

31

Satisfied

12

2017

2018

2019

2020

Most recent survey of U.S. adults conducted June 16-22, 2020

JOHN SOPINSKI/THE GLOBE AND MAIL

SOURCE: pew research center

state of the nation: no satisfaction

Percentage of Americans who say they are satisfied/dissatisfied

with the way things are going in their country today

87

Dissatisfied

68

68

32

31

Satisfied

12

2017

2018

2019

2020

Most recent survey of U.S. adults conducted June 16-22, 2020

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: pew research center

The disturbing conclusion? In three out of the four scenarios, the U.S. winds up in a political crisis. The only stable scenario is one where one of the candidates wins a victory strong enough to sweep away all doubts.

Investors may want to start praying for such a landslide outcome. A swift, indisputable victory by either side would provide at least one point of certainty in an economic environment full of unknowns.

Among the many questions for Canadian investors and companies is how Mr. Trump or Mr. Biden will address the huge deficits and high unemployment created by the pandemic.

Mr. Biden has indicated he would raise taxes on corporations and high earners, a move that might help reduce inequality. However, it could also hobble U.S. stocks. The immediate effect of the tax hikes would be to reduce 2021 earnings estimates for the S&P 500 by roughly US$20 a share, from US$170 to US$150, according to Goldman Sachs analysts.

Story continues below advertisement

More broadly, his plans would reverse more than half the US$2-trillion in corporate tax cuts pushed through by the Trump administration, according to an analysis by the Tax Foundation. But that doesn’t necessarily mean lower deficits. Mr. Biden’s economic advisers include Stephanie Kelton, a prominent advocate of Modern Monetary Theory, which argues debt and deficits matter less than many mainstream economists think.

odds favouring dems

Prediction-market probability that Democrats

have control after U.S. election

100%

90

House:

85%

80

Presidency:

70

62%

60

Senate:

61%

50

40

30

As of July 6, 2020

20

March

June

Sept.

Dec.

March

June

2019

2020

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE:

PredictIt.org; Goldman Sachs Global

Investment Research

odds favouring dems

Prediction-market probability that Democrats have

control after U.S. election

100%

90

House:

85%

80

Presidency:

70

62%

60

Senate:

61%

50

40

30

As of July 6, 2020

20

March

June

Sept.

Dec.

March

June

2019

2020

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: PredictIt.

org; Goldman Sachs Global Investment Research

odds favouring dems

Prediction-market probability that Democrats have control after U.S. election

100%

90

House:

85%

80

Presidency:

70

62%

60

Senate:

61%

50

40

30

As of July 6, 2020

20

March

June

Sept.

Dec.

March

June

2019

2020

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: PredictIt.org;

Goldman Sachs Global Investment Research

In determining how to spur a recovery, a Biden administration is likely to be just as nationalistic as the Trump administration. On Thursday, the presumptive Democratic nominee unveiled a proposal to spend US$700-billion on U.S.-made products and research. He also promised an end to loopholes that allow federal agencies and federal contractors to sidestep existing “Buy American” contracts.

At the very least, a Biden victory would squelch Alberta’s hopes for the beleaguered Keystone XL pipeline. The project, from Calgary-based TC Energy Corp., is designed to carry Alberta crude to U.S. refineries but has aroused opposition because of concerns it could worsen climate change. Mr. Biden has vowed to cancel the project’s permit if elected.

All of this suggests a Biden victory poses risks for Canada. On the other hand, a Trump victory creates threats of its own.

The President’s erratic trade policy frequently sideswiped Canada during his first term while his shambolic handling of the novel coronavirus crisis undermined confidence in the U.S. recovery. Even before the pandemic struck, his tax cuts had blasted a hole in the federal budget.

On the global stage, his increasingly tense confrontations with Beijing have helped to chill trade. Meanwhile, his disdain for international organizations has made it difficult for the West to form a united front on issues such as China’s increasing assertiveness, including its crackdown on dissent in Hong Kong.

Story continues below advertisement

For now, markets appear confident things will work out. Stock prices are rising even as prediction markets such as predictit.org indicate the Democrats are poised to sweep the election. Mr. Biden is expected to take the presidency while his party is also forecast to win control of both the Senate and the House of Representatives.

The caveat is that nothing is for sure in 2020. Back in February, when the U.S. economy was booming, Mr. Trump’s re-election seemed like a done deal. Then the pandemic, a crashing economy and George Floyd’s death turned expectations upside down.

More drama may lie ahead. Multiple polls show Mr. Biden holds a impressive lead in the presidential race. However, surveys also indicate he stirs little passion among voters. A mere 6 per cent of respondents to a Pew Research Center poll in mid-June thought he would make a great president.

Mr. Biden’s strength lies in his middle-of-the-road, steady-as-she-goes persona. When going up against the divisive Mr. Trump, his reputation for personal decency may be all that is required to attract many centrist voters. But he is vulnerable if Republicans hammer him on the points where he is weakest – like how his son Hunter has managed to cash in on the family name with lucrative corporate gigs.

More than anything else, voters seem angry and volatile. The number of voters who describe themselves as “dissatisfied” has soared this year, according to another Pew survey.

The possibility of a close election in this charged environment raises some interesting scenarios. Among them is the risk the election result could remain in limbo until December or even longer.

Story continues below advertisement

The increasing use of mail-in ballots could contribute to such delays. In 2016, 24 per cent of ballots cast in the presidential election were via mail. The figure will probably spike higher this time around as voters seek to avoid ballot lines because of infection fears.

“In a close election, it will take time to count – and invariably re-count – all the mail-in ballots,” Goldman Sachs analysts headed by strategist David Kostin wrote in a report this week. A surge in absentee voting could leave the results of the election in dispute for weeks, the analysts say.

Any uncertainty would play into the hands of Mr. Trump. Many observers doubt he would leave office on Jan. 20 without exploring all options for contesting a close result. He has already laid the foundation for a possible challenge by making unsubstantiated claims that the increasing use of mail-in ballots will lead to voter fraud.

“Trump got himself impeached by trying to blackmail a foreign country into helping his re-election campaign,” Washington Post columnist Max Boot wrote this week after participating in the Transition Integrity war game. “He will stop at nothing to avoid the stigma of being branded a ‘loser.’ ”

Investors should not underestimate the possibility of post-election pandemonium.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies