In a note published Monday, Solita Marcelli, chief investment officer Americas at UBS Financial Services, discusses how investors should approach election night and the attendant market reaction.
1. Watch the key states.
Both President Donald Trump and Democratic candidate Joe Biden have certain must-win states. The polls largely favor Biden nationwide, but the Electoral College matters most in the end.
Of the last three Republican presidential terms, the president-elect also won the popular vote in only one election.
Trump won Michigan and Wisconsin in 2016, where the polls currently favor Biden by a large margin. That makes the other large and medium-sized states tipping points for this election.
Florida and Pennsylvania become must-win states for Republicans, although even if Democrats do not take these two states, a win in Arizona or North Carolina would still leave a path to victory for Biden.
2. Who counts first will matter.
Pennsylvania is perhaps the most important state in this election, but don’t expect much from it on election night.
Some states have already started counting early votes, while others are not allowed to start processing ballots until after the election. So the focus on election night will be on Florida, North Carolina and Arizona.
If Florida and North Carolina show large wins for Biden, then we can assume he will win the presidency, UBS says, but if they go for Trump, we will have to look more closely at Midwestern battleground states.
3. Don’t forget the Senate.
In the event of a Biden presidency, the question will become whether Democrats can also win the Senate. Democrats need to flip at least four seats from the following races to gain control: Georgia with two, Iowa, Maine, Montana, North Carolina and South Carolina.