Investors: Focus on State Polling as U.S. Election Nears

Investors: Focus on State Polling as U.S. Election Nears

With less than a week to go until the U.S. presidential election, investor anxiety about next Tuesday’s outcome is running high, as evidenced by the recent move in risk assets. So what should investors (and others) focus on between now and Election Day? We think state polling in the coming days will be especially important.

Since last Friday’s revelation that the FBI is considering other possible “pertinent” emails in the Hillary Clinton case, several national polls have shown the presidential race tightening, continuing a trend we had observed even before Friday’s news.

But at the end of the day, national polls can only tell us so much. Because of the unique way we elect our presidents in the U.S. – through the Electoral College, rather than the popular vote – a handful of key battleground states will likely dictate next Tuesday’s outcome, as in so many prior races.

Between 10 and 12 of these battleground states are important, but arguably only a subset are truly critical to get to the needed 270 electoral votes to win the White House: Florida, Ohio, North Carolina and Pennsylvania. That is because Donald Trump would have to win all four if Clinton maintains her relatively healthy leads in the battleground states of Colorado, Virginia, Michigan and Wisconsin.

Pathways to the White House

In other words, even considering Friday’s news, Trump’s pathway to 270 electoral votes, although possible, remains narrow. To be even more reductive, it is unlikely Trump wins the White House if he does not win Florida.

Similarly, most pathways for a Clinton victory require her to win Pennsylvania. She can afford to lose certain battleground states (including Florida, Ohio and North Carolina) given her polling in others, but it’s hard to see her winning the White House if she loses Pennsylvania.

Polling in Ohio shows Trump with more than a three-point lead on average and shows Trump tied with Clinton in Florida and North Carolina (according to Real Clear Politics). Clinton’s lead in Pennsylvania remains solid, however, with an average four-point lead over Trump.

We should be getting more state polling in these four states (and the other battleground states) in the coming days, and we think these data are what investors should focus on – not simply the national polls.

Regardless, with a tightening race and a larger number of undecided voters this election cycle, the chances of an unexpected election outcome are not immaterial – and that could cause continued repricing in the market, as we’ve seen over the past few days.

Libby Cantrill is PIMCO’s head of public policy and a regular contributor to the PIMCO Blog.