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This quarter’s "top of mind" topics
- The upcoming US election?
- Hidden risks for the year ahead
- Thematic investing
- Resolutions for 2020 and implementation ideas
To begin the new year, I’ll consider the potential market impact of the coming US elections, several risks that investors may be overlooking, and the appeal of longer-term thematic investing in a slow-growth world. I’ll also propose a few resolutions for 2020.
1. The upcoming US elections
Analysis by Mike Medeiros from our Global Macro team suggests that a handful of states are likely to drive the ultimate outcome of the US presidential election. As shown in Figure 1, there are four states (in brown) in which Mike sees the chances of a Republican or a Democratic win as a “toss up,” and those states account for 57 of 270 required electoral votes — enough to tip the balance.1
While a small number of states may ultimately determine the outcome, I think the market will react to a variety of developments between now and the election, from the primaries to the conventions — with an impeachment in the background — generating a lot of volatility along the way. As the race narrows, the most likely outcomes are a populist Republican (Trump) against either a populist Democrat (e.g., Sanders or Warren) or a centrist Democrat (e.g., Biden). In the unlikely event that Trump doesn’t finish his term, we could see a centrist Republican in the mix instead. (The odds markets I’ve looked at show a 20% – 25% chance that Trump will not finish his first term in office. Of course, it’s worth remembering that the…
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157 electoral votes include one vote from Nebraska, which allows for split electoral vote.