Our Fearless Forecast

This will likely be a very close election, reflected in polls, prediction markets and models. Not only are they all close – they also do not agree with each other as to the winner. Close elections are subject to recounts, frauds, disputes and delays, and the risk that “faithless electors” could flip a seemingly settled election in December. Such things would discomfit markets. Harris is very slightly ahead of Trump in national polls. Trump is slightly, but further, ahead in state polls in battleground states. Adjusting for polling error trends from 2016 and 2020, we get the astonishing result that Trump would win the popular vote but lose in the Electoral College. Trump is ahead in prediction markets. He is narrowly ahead in the Fair model, but Harris is narrowly ahead in the Silver model, and more definitively ahead in the TrendMacro model (based on economic data likely not relevant in the post-pandemic world). Republican early voting is outstripping Democratic, revealing at least an enthusiasm gap. The House is still 50/50. Senate control is certain to go to the GOP. Our call: Trump wins. Markets are largely indifferent as to the presidency, because gridlock is probable. Markets seem to be implying that Trumponomics would be better for growth. We think a Trump win would immediately energize small cap stocks driven by animal spirits and liberation from excessive regulation.