5 November is the day many have been waiting for – in addition to the election of the House of Representatives and about a third of the Senate, a new president will be elected in the USA. Since the incumbent’s decision not to stand for election, the Democrat Kamala Harris has made an impressive comeback against the Republican Trump.
There are many polls and bookies where you can voice your opinion (and bet on it). This comes in the context of the fact that traditional telephone polling no longer produces the kind of forecasts in the internet age as they used to. We will use one of the polls here, which shows a varying but constant lead for Harris over the last two months:
Trends in the polls for the US presidential election
Source: Bloomberg, PredictIt; as of 30 September 2024
At the same time, it is not the overall result (i.e. the so-called popular vote) that is decisive for the election, but the result of the vote of the Electoral College, which is determined and sent by each federal state. It is important to note here that there are federal states that historically rarely change their voting behaviour, and others where decisions are traditionally close and changing. The candidates’ campaign activities are concentrated on these so-called swing states.
Currently, 157 of the electoral college votes are considered to come from swing states, out of a total of 538 votes. This shows that the situation could ultimately be different – that’s because Trump has a certain lead in the polls in this regard:
Detailed results of swing state polls for the US presidential election
Source: Bloomberg, PredictIt; as of 30 September 2024
Overall, it is fair to say that the two camps – Republicans and Democrats – in the USA are roughly equal in strength. Tactical voting, i.e. voting for one party in presidential elections and another in the parliamentary houses – is not uncommon, and economic sentiment is very important: is the economy is growing or shrinking, is the disposable income rising or falling, what is the petrol price? The geopolitical situation also plays a role, but traditionally to a lesser extent than the economic situation, with local issues being more decisive.
The “temperature” of the US economy can be measured not only in absolute terms, but also relatively: does new data come in above or below analysts’ expectations? This shows that the situation turned positive in September after a negative situation from June to August.
Economic surprise indices
Source: Bloomberg, PredictIt; as of 30 September 2024
A positive economic mood in the USA favours the incumbent – and this should also apply to Vice President Harris.
One issue that needs to be addressed for the future is the comparatively high budget deficit as compared to Europe, where a deficit of 3% is a customary assessment basis (which is sometimes better, sometimes less well met within the EU). In the USA, the deficit is currently 7.2%, as the following chart shows. On the other hand, national debt is relatively constant as measured against economic output, which is driven by consistently high growth.
Budget and government debt
Source: Bloomberg; as of 30 September 2024
Finally, it is interesting to take a look at large economic areas. Just a few years ago, it was predicted that China would overtake the USA in the near future due to its even higher growth rates than the ones generated by the United States, which in turn has been growing faster than Europe for a long time (N.B. the weakening growth and low innovative strength in Europe are indeed becoming more and more of a cause for concern). Now, however, growth in China is slowing down, and so the USA’s global pole position seems to be secure for the time being.
Output of large economic areas (in USD trillion)
Source: Bloomberg; as of 30 September 2024
Conclusion
At the moment, the race for the US presidency is still undecided: in the nationwide polls, Harris has a lead, while in the swing state polls, Trump is ahead. On 5 November, the final outcome may be decided by economic sentiment – here, the data situation has improved since October, following some previously uncomfortable readings.