CICC: A Guide to Watching and Trading the U.S. Election

As the voting day approaches, the market is increasingly focused on how to track real-time election trends, when results will be announced, and how to position trades around the election outcomes. In this report, we will discuss these key topics.

Election Situation: Trump Still Leads, But Margin Narrows

Trump continues to lead in swing states. As of November 1, in national polls, Trump still leads with a support rate of 48.4%, ahead of Harris by about 0.3 percentage points. In comparison, during the same period in the 2016 and 2020 elections, Trump trailed Hillary and Biden by 7.8 and 1.5 percentage points, respectively. Looking at swing states, Trump maintains his lead, but it has slightly narrowed compared to a week ago, with Harris overtaking him in Michigan and Wisconsin. Based on current polls, if we assume electoral votes are allocated strictly according to each state's current polling, Trump and Harris would win 287 and 251 votes, respectively (with 270 votes being the threshold for victory).

Chart: Trump maintains his lead, but it has slightly narrowed compared to a week ago, with Harris overtaking him in Michigan and Wisconsin.

Source: RCP, CICC Research Department

From the faster-changing betting market, Trump's betting odds advantage has recently narrowed significantly. According to RCP's aggregated data from various platforms, as of November 2, 2024, Trump's betting odds are 54.7% vs. Harris's 44.1%, a significant narrowing from 63.9% at the end of October.

Chart: Trump's betting odds are 54.7% vs. 44.1% for Harris, a significant narrowing from 63.9% at the end of October.

Source: RCP, CICC Research Department

Early Voting: Higher Proportion for Democrats, But Judging Lead Based Solely on Party Affiliation Is Unreliable

This year, early voting and mail-in ballots are expected to account for as much as 65%. There are nearly 170 million registered voters in the U.S., and the voting rate for the 2020 election was about 66% (the number of votes cast as a percentage of the eligible voting population), the highest level in over a century. Based on an estimated 245 million eligible voters in 2024 and a 66% voting rate in 2020, the total number of votes in 2024 could reach 160 million. As of November 1, there have been 70 million early votes (including in-person and mail-in), accounting for 43% of the total votes. If we include the mail-in ballots that have not yet been returned (though this portion may not be fully returned), the number of early votes could reach 100 million, accounting for 65% of the estimated total votes The proportions of early voting in the 2020 and 2016 elections were 64% and 36.6%, respectively, and this year remains at a high level.

Chart: The estimated total number of votes in 2024 is 160 million

Source: USA.ORG, UF Election Lab, CICC Research Department

Chart: The currently estimated proportion of early voting is at a high level

Source: USA.ORG, UF Election Lab, CICC Research Department

Among early voters, the proportion of registered Democrats is higher than that of Republicans, but using this as a reference for the final result is limited. Currently, among the 70 million early votes, according to UF Election Lab data, the proportions of registered Democrats and Republicans are 38.2% and 36.1%, respectively, showing little difference. CNBC data also shows both are around 40%, which is quite close. Among early votes, Democrats tend to vote more by mail (Democrats 42.6% vs. Republicans 33.5%), while Republicans have a higher proportion of in-person voting (Republicans 39.7% vs. Democrats 31.7%). However, in some swing states, especially Pennsylvania, which is a focus this time, UF Election Lab estimates that the proportion of Democratic voters among early voters is 56%, significantly higher than the 33% of Republican voters, seemingly giving Harris an advantage. However, early voting does not mean early counting, and registered party members do not constitute a majority among U.S. voters. The early voting proportion in the key swing state of Pennsylvania is not high (24%), so relying solely on early voting and party affiliation among early voters to determine a leading advantage is not reliable.

Chart: Based on the registered party affiliation of early voters already received in swing states, Harris has a larger leading advantage, but the election result still has great uncertainty

Source: CNBC, RCP, UF Election Lab, CICC Research Department

Chart: Party affiliation of early voting by state

Source: CNBC, CICC Research Department

Viewing Guide: Major Polling Stations in Beijing Time Close Around Noon on the 6th, Results Expected in the Evening, Pennsylvania is the "Tipping Point"

As we approach the voting day on November 5th, how to track the real-time election situation and when results will be available are questions of great concern.

1. How long is the voting time? Closing times vary by time zone, generally closing around noon on the 6th Beijing time

Due to different time zones, polling stations across the United States open and close at different times on November 5th, generally closing from east to west. For example, the first polling stations to close include parts of Indiana and Kentucky, closing at 6 PM Eastern Time on November 5th (corresponding to 6 AM Beijing time on the 6th). The last state to close is Alaska, which will close between noon and 1 PM Beijing time on the 6th.

The voting cutoff times for seven key swing states are as follows (all in Beijing time): Georgia, 7 AM on the 6th; North Carolina, 7:30 AM on the 6th; Pennsylvania, 8 AM on the 6th; Michigan, 8-9 AM on the 6th; Arizona, 9 AM on the 6th; Wisconsin, 9 AM on the 6th; Nevada, 10 AM on the 6th.

Chart: The last swing state, Nevada, will close polling stations at 10 AM Beijing time on the 6th.

Source: 270towin, CICC Research Department

2. When will the results be announced? Possibly in the evening on the 6th Beijing time

The counting rules and times vary by state; for example, some states count votes while voting is still ongoing on election day, while others allow early voting to be counted before election day. Shortly after polling stations close in each state, a significant portion of the voting results will already be counted, and the remaining ballots usually do not affect the overall outcome unless the election is very close. Therefore, under normal circumstances, the final results will generally be announced no later than midnight on election day, which is noon Beijing time on the 6th. However, if there are many mail-in ballots or a recount is triggered, the announcement of results may be delayed. Given the high proportion of mail-in ballots this time and the rules in some swing states that do not allow early counting, the final results may be slightly delayed, but they should generally be available by the afternoon or evening on the 6th Beijing time. If the results in certain key swing states are very close and require a recount, this will also delay the announcement of results. Specifically, for the seven most critical swing states, here are the specific counting times and details (all in Beijing time):

► Georgia: Likely to be the first swing state to announce results. Georgia has a high proportion of early voting (80%), and they began processing mail-in ballots on October 21st, requiring that mail-in ballots be sent out before polling stations close. It is expected that 90% of the counting will be completed by 10:30 AM Beijing time on the 6th. Georgia does not have an automatic recount trigger, but if the final margin is less than or equal to 0.5% of the total ballots, candidates can request a recount ► North Carolina: Results may be available by noon on the 6th. North Carolina has a high early voting rate (75%), and this year's new regulations require that mail-in ballots must be received by the day before voting. Early voting and Election Day voting results will be announced between 7:30 AM to 9:30 AM and 8:30 AM to 1 PM Beijing time on the 6th. North Carolina does not have an automatic recount trigger mechanism, but if the final margin is less than or equal to 0.5% of the total ballots or 10,000 votes, candidates can request a recount.

► Michigan: Results may be available by noon on the 6th. Most precincts in Michigan began processing mail-in ballots on October 28, and mail-in ballots must be received before the polling stations close on Election Day. Most areas will complete counting by the morning of the 6th, but complete results will not be available until the evening. If the statewide ballot margin is less than 2,000 votes, an automatic recount will be triggered.

► Pennsylvania: Results may be announced in the afternoon to evening on the 6th. Mail-in ballots must be received by the day before voting, and processing starts at 7 AM on Election Day, with no early counting allowed, so counting may take longer. If the statewide ballot margin is less than or equal to 0.5%, an automatic recount will be triggered.

► Wisconsin: Results may be announced in the afternoon to evening on the 6th. Mail-in ballots must be received by the day before voting, and like Pennsylvania, early counting is not allowed, but election workers must count overnight to speed up the announcement. Historically, counting is usually completed before 1 PM. Wisconsin does not have an automatic recount trigger mechanism, but if the final margin is less than or equal to 1%, candidates can request a recount.

► Arizona: Preliminary results may be available in the morning, but full results are expected by 5 PM. Most voters cast their ballots by mail and early counting is allowed, but counting for Election Day votes will not begin until after the polls close. Preliminary results are usually released around 10 AM, but the overall announcement time is extended for two reasons: 1) the number of ballots delivered on Election Day needs to be counted and announced before official counting, and 2) Maricopa County, the largest county in the state, estimates that complete statistics for ballots cast at polling places on Election Day may not be available until 5 PM. The automatic recount trigger threshold is 0.5%.

► Nevada: Counting of mail-in ballots may take several days. Official voting results will be announced a few hours after the polls close, but counting of mail-in ballots will still take several days. Ballots must be postmarked by the day before voting, and counting begins as soon as mail-in ballots are received, but since Nevada allows ballots to be received until November 9, the counting time is extended.

3. How to watch? Pennsylvania is the "match point," Harris "must" win Pennsylvania, while Trump has more paths to victory.

Due to the unique Electoral College system in the United States and the stable "base" of both parties, most states play a "formality" role in elections. For example, according to 270towin's aggregation of polls and various model predictions, Harris has essentially locked in 226 electoral votes, while Trump has locked in 219 votes (270 electoral votes are needed to win the election) On the contrary, some so-called "swing states" with unclear positions and tight election situations have become the key to victory in the election. This election has a total of seven swing states. The Blue Wall states (referring to states that have supported the Democratic Party in the past eight presidential elections but flipped in the 2016 election) include Michigan (15, -0.8%, the former refers to the number of electoral votes, the latter refers to the extent to which Trump leads Harris in polls, the same below), Pennsylvania (19, 0.4%), and Wisconsin (10, -0.3%), totaling 44 votes; the southern swing states in the "Sun Belt" include Georgia (16, 2.6%), North Carolina (16, 1.5%), Arizona (11, 2.3%), and Nevada (6, 1.5%), totaling 49 votes. Among them, Pennsylvania, with 19 electoral votes, has become the "deciding point" in this election.

From the current perspective of winning possibilities and paths, Harris "must" win Pennsylvania; otherwise, it will be very difficult to win; Pennsylvania is equally important for Trump, but there are other paths, at least securing one Blue Wall state (not necessarily Pennsylvania). Here are the specific paths:

► Trump's winning path: Winning only the swing states in the "Sun Belt" is not enough for Trump to reach 270 votes; he needs to win at least one Blue Wall state. 1) If Trump wins Pennsylvania, he only needs to secure Georgia and Arizona in the Sun Belt (where Republican polls lead by more than 2%), plus North Carolina or Nevada (where Republican polls lead by 1.5%) to achieve victory. 2) If Trump loses Pennsylvania, another likely path is to win all four Sun Belt states and either Wisconsin or Michigan, with Wisconsin showing a lower lead for Democrats (leading by 0.3%).

► Harris's winning path: 1) If Harris wins all Blue Wall states, especially Pennsylvania, along with the currently almost secured traditional blue state votes, she will just reach 270, which is also the path her campaign is currently focusing on. Among these three Blue Wall states, the Democrats have a slight lead in polls in Michigan and Wisconsin, while Pennsylvania has greater uncertainty, making it particularly important. 2) If Harris wins Pennsylvania but loses Michigan or Wisconsin, she needs to pay attention to whether North Carolina can be reversed (where the Republican lead is lower compared to other states). 3) If Harris loses Pennsylvania, or simultaneously loses Michigan and Wisconsin, she needs to win at least two swing states in the Sun Belt to achieve victory, which is very difficult.

Chart: Pennsylvania is key; losing Pennsylvania significantly increases Harris's challenges, while Trump has more paths to victory.

Source: RCP, China International Capital Corporation Research Department

4. Possible surprises? A tie or refusal to accept the results

In this election, there are three scenarios that could lead to a tie. In this case, the House of Representatives and the Senate would need to vote to elect the President and Vice President, which may be more favorable to the Republican Party but would extend the time. The three scenarios are: 1) Harris wins Georgia, Arizona, Wisconsin, and Nevada; 2) Harris wins in Georgia, North Carolina, and Arizona; 3) Harris wins North Carolina, Arizona, Wisconsin, and Nevada. In the event of a tie, an emergency election will be held, with the House of Representatives electing the president, where each state's representatives form a delegation and cast one vote collectively, requiring 26 votes or more to win out of the 50 states. The Senate elects the vice president, with each senator casting one vote, requiring 51 votes or more to win. The elections of the House and Senate are independent, which could result in a president and vice president from different parties. At that time, the composition of both chambers of Congress in this election will play a crucial role.

The second unexpected scenario is that the losing side refuses to accept the election results. Generally, after the results are announced, the losing side will issue a statement acknowledging their defeat and accepting the election results. However, if in a low-probability event, the losing side does not acknowledge the election results, it could lead to greater turmoil. For example, in 2020, Trump questioned the results, which triggered the Capitol incident in early 2021.

Trading Guide: Overall "doing the opposite" has a greater chance of success, but "Republican victory" requires more time to wait

When considering the impact of the election results on various assets, in addition to the effects of the policies themselves, it is also necessary to comprehensively consider expectations and the pace of policy: on one hand, the market has already begun to react to the Trump trade (such as U.S. Treasuries, the U.S. dollar, gold, traditional energy and financial stocks, Bitcoin, and the exchange rates of Mexico and Vietnam), but the degree of incorporation varies among different assets. Currently, U.S. stocks, U.S. Treasuries, the U.S. dollar, gold, Bitcoin, and the RMB exchange rate have relatively more expectations priced in for the Trump trade, while copper, crude oil, and Chinese export chains have relatively less; on the other hand, the actual implementation of policies also requires time, and the sequence and difficulty of different policies vary.

Chart: Assets are shifting towards the Trump trade, but there has been some recent pullback

Source: Bloomberg, FactSet, CICC Research Department

Chart: U.S. stocks, U.S. Treasuries, the U.S. dollar, gold, Bitcoin, and the RMB exchange rate have relatively more expectations priced in for Trump's victory trade, while copper, crude oil, and Chinese export chain stocks have relatively less

Source: RCP, Bloomberg, CICC Research Department

Based on this, our recommended overall trading strategy is: 1) If the results are stronger than expected, i.e., "Republican victory" (Trump as president + Republicans controlling both the House and Senate), then the current "Trump trade" will have some time and amplitude to rise, but will subsequently enter a period of waiting for policy implementation, similar to the surge after the 2016 election and the gradual slowdown after January 2017; 2) If the results are lower than expected, meaning any scenario other than "Republican victory," especially if Harris wins the election, it will directly lead to a reversal of all trades Specifically,

Chart: Experience from 2016: "Trump Trade" → Policy obstacles lead to a pause → Restart after tax reform

Source: Bloomberg, CICC Research Department

► A "Republican sweep" will strengthen expectations for the advancement of Trump’s policies, forcing some previously hesitant investors to quickly chase higher prices. This means that the overall Trump trade still has some room, and assets that were not previously factored into expectations will react more significantly. 1) U.S. stocks, U.S. bonds, the U.S. dollar, and Bitcoin still have the potential for short-term gains, similar to the Trump trade in 2016, although the rebound will be lower than in the previous round. After a period of trading, there may be a pause or reversal. 2) Conversely, copper, crude oil, and the Chinese export chain face risks of insufficient compensation for expectations. Strong cyclical and resource-related risk assets like copper and oil may rebound under re-inflation expectations; gold, which is based on uncertainty and risk aversion, may instead reverse; the Chinese export chain may face marginal pressure, with industries having a low proportion of exports to the U.S. and a high proportion of imports from China showing relative resilience.

► Other combinations besides a "Republican sweep" could lead to a reversal of the Trump trade. For example, a Harris victory would directly lead to a reversal of the Trump trade, affecting the U.S. dollar and U.S. bond yields, with gold potentially correcting, and U.S. stocks facing certain pressure, while other assets harmed by Trump’s policies would see relief. If Trump wins but the Democrats control the House of Representatives, the advancement of incremental stimulus policies may be hindered, which would also reverse U.S. bond yields and the dollar, putting pressure on U.S. stocks, while the export chain would still be under pressure, and gold would continue to trade on tariffs and geopolitical uncertainties.

In summary, the overall "contrarian" trading strategy has a higher chance of success, but under a "Republican sweep," more time is needed to let the situation develop. U.S. bonds may provide trading opportunities after a rise; gold should be monitored for short-term overextension risks, with partial profits taken on highs; U.S. stocks and the dollar are positive in the long term, but short-term disturbances should be watched for better timing; risks in the export chain should be guarded against; copper and oil are neutral to slightly bullish, waiting for catalysts.

Chart: Asset impacts under different scenarios: Scenario 1: Demand and inflation rise together; Scenario 2 and 3: Status quo maintained; Scenario 4: Stagflation

Source: RCP, CICC Research Department

Author of this article: Liu Gang, CICC, Source: CICC Insights, Original title: "CICC: Watching the U.S. Election and Trading Guide"

Source

Liu Gang, CFA Analyst SAC License No.: S0080512030003 SFC CE Ref: AVH867

Li Yujie Analyst SAC License No.: S0080523030005 SFC CE Ref: BRG962 Yang Xuanting Analyst SAC Certification Number: S0080524070028