Trading the US Elections - TDS

Research Team at TDS, suggests that the current polling would suggest a Clinton victory in the US Presidential Elections, the Republicans maintaining control of the House and the Senate returning to the Democrats by a slim margin.

Key Quotes

“Electoral math risks

Bottom Line: If current state-level polling is correct, Clinton would win 294 electoral votes, above the 270 needed to win.

Safe votes: Polling suggests 222 safe electoral votes for Clinton and 155 for Trump.

Likely Votes: There are then another 42 electoral votes from states (PA, WI, RI, ME, NH) that seem likely to vote for Clinton given her margin in the polls. For Trump, there are 25 electoral votes (GA, UT, AK) that are likely to vote in his favor unless there is a strong Clinton victory panning out through the night.

Leaning Votes: Given the tightening in the polls, the night will likely come down to the seven states that are leaning slightly in favor of each candidate. The above leaves Clinton at 264 votes, with 270 needed to win. Clinton would need to win one of the three states which are leaning marginally in her favor in the polls—North Carolina, Colorado, and Nevada. For Trump, there are four key races to watch to gauge his chances—Ohio, Florida, Arizona, and Iowa—here polls are leaning in his favor, but could be close. If he loses any of those, the odds of winning the Presidency are low.

Senate: Current polling shows Republicans retaining control of the Senate with 53 seats. Nevertheless, with the polls showing races well within the margin of error, our baseline scenario remains that Democrats will take control of the Senate by a slim margin.

Market Reaction: In a Clinton victory, we would see Fed funds repricing December odds to around 85%, 10yr UST yields up 8bp and the curve bear flattening, underperforming other G10 rates markets, the USD mildly stronger with USDMXN 3% lower and USDCAD 1.2% lower, and a small rally in oil and base metals. In a Trump victory, we see December 2016 FOMC odds re-pricing to 20%, 10yr UST yields down 12bp in a bull steepening, the USD weaker with USDMXN 6% higher and USDCAD and EURUSD about 2% higher, while oil and base metals fall around 4%.”