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The US Election’s Chaos Quotient

Summary:
While hoping for a conclusive outcome on November 3 (or immediately thereafter), market watchers unfortunately must prepare for the worst. After all, US President Donald Trump and the Republicans are not even hiding their plans to steal the election. NEW YORK – Opinion polls in the United States have long pointed to the strong possibility of a Democratic Party sweep in the election on November 3, with Joe Biden winning the presidency and Democrats gaining control of the US Senate and holding on to the House of Representatives, putting an end to divided government. The US Election’s Chaos Quotient J. Countess/Getty Images

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While hoping for a conclusive outcome on November 3 (or immediately thereafter), market watchers unfortunately must prepare for the worst. After all, US President Donald Trump and the Republicans are not even hiding their plans to steal the election.

NEW YORK – Opinion polls in the United States have long pointed to the strong possibility of a Democratic Party sweep in the election on November 3, with Joe Biden winning the presidency and Democrats gaining control of the US Senate and holding on to the House of Representatives, putting an end to divided government.

But if the election turns out to be mostly a referendum on US President Donald Trump, Democrats might win just the White House while failing to retake the Senate. And one cannot rule out the possibility of Trump navigating a narrow path to an Electoral College victory, and of Republicans holding on to the Senate, thus reproducing the status quo.

More ominous is the prospect of a long-contested result, with both sides refusing to concede as they wage ugly legal and political battles in the courts, through the media, and on the streets. In the contested 2000 election, it took until December 12 for the matter to be decided: the Supreme Court ruled in favor of George W. Bush, and his Democratic opponent, Al Gore, gracefully conceded. Rattled by the political uncertainty, the stock market during this period fell by more than 7%. This time, the uncertainty could last for much longer – perhaps even months – implying serious risks for the markets.

This nightmare scenario must be taken seriously, even if it currently seems unlikely. While Biden has consistently led in the polls, so, too, had Hillary Clinton on the eve of the 2016 election. It remains to be seen if there will be a slight surge in “shy” swing-state Trump voters who are unwilling to reveal their true preferences to pollsters.

Moreover, as in 2016, massive disinformation campaigns (foreign and domestic) are underway. US authorities have warned that Russia, China, Iran, and other hostile foreign powers are actively trying to influence the election and cast doubt on the...

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