Why Election Day is Not the Most Important Day on the Calendar

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On November 3rd the eyes of the world will be focused on the US Election. Although Election Day is usually the answer to who will be the President for the next four years this year all bets are off.

The 2020 Election is unusual not only because of the particularly partisan nature of the contest or because it is taking place in the middle of a pandemic that is sure to muddy up the voting process as millions of mail-in ballots will need to be tabulated. Election 2020 is unique because for the first time in the history of the Republic one of the candidates has refused to commit to a peaceful transition of power and may in fact use all the levers to Presidency to deny the office to his opponent should he lose. Donald Trump’s insistence that the only way he will lose the election is if it is “stolen” from him, almost assures that the process will drag on possible all the way to Inauguration Day which could result in outcomes that almost no one expects.

Although market volatility remains relatively high priced into the Election Day event, few participants are anticipating in the kind of tumult that could result from protracted litigation and even fewer market players are aware of the quirks of the US Constitution that could provide wholly unexpected results.

Let’s take a look at the 79 days between Election and Inauguration Day – a period that the Atlantic magazine dubbed “the Interregnum” and consider a few possible scenarios.

Before we start, however, it is important to be aware of the electoral calendar as laid out of the Constitution in order to see how the process will unfold.

November 3rd, 2020 – Election Day
December 14th, 2020 – Electors meet in all 50 States to cast their ballots for President
January 3rd, 2021 – Newly elected Congress is seated
January 6th, 2021 – House and Senate meet jointly for a formal count of the electoral vote
January 20th, 2021 – Inauguration Day

The election is expected to be close and especially so in the battleground states that could flip the Presidency to one candidate or the other. Although most people assume that electors are chosen by a popular vote there is actually nothing in the Constitution that commands it to be so. The Constitution only requires that each state appoint the electors. In the six battleground states of Arizona, Florida, Michigan, North Carolina, Pennsylvania, and Wisconsin the legislature is Republican and they could in effect cancel out the popularly elected slate of Biden electors and send electors faithful to Trump to Washington DC. Legislators in Pennsylvania have already discussed such a possibility openly. In four of those states, the Governors are Democrat and they will most certainly certify the popular vote count resulting in a very strange possibility of some states producing two competing sets of electors.

This will not only cause confusion, chaos, and perhaps even riots but may throw the election into the House of Representatives if there is no clear electoral college winner. If the Democrats hold the House and win the Senate Biden will be elected by Congress in a relatively straightforward way and a Constitutional crisis will be averted.

But what if the Congress is split? At this point, we enter a truly surreal scenario that the Atlantic helps sketch out, “The decision is thrown to the House, with one vote per state. If the current partisan balance holds, 26 out of 50 votes will be for Trump.

Before Pence can move on from Pennsylvania to Rhode Island, which is next on the alphabetical list as Congress counts the vote, House Speaker Nancy Pelosi expels all senators from the floor of her chamber. Now Pence is prevented from completing the count “in the presence of” the House, as the Constitution requires. Pelosi announces plans to stall indefinitely. If the count is still incomplete on Inauguration Day, the speaker herself will become acting president.”

Nancy Pelosi as President in Trump v. Biden? Very few investors except such an outcome or the concomitant turmoil that it may cause in the markets. Granted such far-fetched results are a long shot, but 2020 has been full of surprises that no investor would have predicted which is why it is important to understand that Election Day 2020 may be just the beginning of our national saga rather than the end.

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