The events over the weekend have only underscored the unconventional – and some would argue unstable – nature of this year’s presidential election cycle. Reeling from the release of a video in which he made lewd comments about women, a vital demographic constituting 53% of the electorate, Trump’s objective going into last night’s debate was to stop the bleeding and tame the calls for him to leave the race.
In this regard, Trump succeeded. Although he floundered in the first 20 minutes, he regained his footing later on by attacking Clinton constantly on those issues where she is most vulnerable, including her emails and paid speeches to Wall Street. Clinton, for her part, came off as prepared and policy-oriented, but left some unsatisfied with a number of her answers and failed to land any serious blows.
While Trump may now be off life support, his debate performance is unlikely to achieve what it needed to do: Broaden his appeal and convince the higher-than-usual proportion of undecided voters this election to support him. There was plenty of red meat for his base, including many assertions that would likely be disqualifying in any other election cycle, including a call for Clinton’s imprisonment. But those personal attacks are unlikely to draw-in the needed swing voters, especially undecided women.
What should investors look out for in the remaining 29 days until the election?
The third and final debate will be held next Wednesday, October 19th and will be another important inflection point in the race. In the meantime, pay attention to how the Trump videotape plays out over the coming days, and specifically whether it leads to any further disavowals from establishment Republicans. Whether vice presidential candidate Mike Pence remains on the ticket will also be critical. Trump openly disagreed with Pence on Russian foreign policy last night, asserting that the two “haven’t spoken”. While still a low probability, Pence leaving the ticket could be yet another destabilizing event in what has already been a volatile election cycle.
Lastly, watch the polling in the ten key swing states that will likely dictate the outcome in November, with a specific focus on Florida and Ohio. These are two must-win states for Donald Trump, and two in which he is now trailing Clinton. If Trump can claw back and overtake her lead in those states, he may have a fighting chance to win the White House. But without them, it is difficult to imagine a scenario in which he secures the needed 270 electoral votes required for victory in November.
Libby Cantrill is PIMCO’s head of public policy and a regular contributor to the PIMCO Blog.