Washington DC Wisdom: What Comes Next in Georgia

On Saturday, November 7, 2020, major news outlets such as ABC News, the Associated Press, and Fox News had declared that former Vice President Joe Biden would become the 46^th President of the United States; Kamala Harris is running as Mr. Biden’s Vice President.¹ Through November 10^th, President Trump has not conceded the race; Attorney General William Barr has authorized federal prosecutors to pursue any “substantial allegations” of voting and vote-tabulation irregularities.² In the upper right we are counting down to January 6, 2021, the date when the electoral college vote is certified.³ State electors vote on December 14^th.

Georgia, fondly known as “The Peach State”, will play a large role in the future of US politics over the coming months.

Georgia General Election Results

Through the morning of November 10^th, Georgia has counted over 99% of the outstanding votes. Mr. Biden has a 12,337 lead over President Trump, which is a 0.25% margin on the state total.⁴ The margin between the lead candidates is within 0.50% and a recount has been requested.

According to research performed by the Associated Press, there have been at least 31 statewide recounts in Georgia since 2000. And of those, only three changed the outcome of the election. The initial margins in those races were all under 300 votes.⁵

Georgia represents 16 electoral college votes and has not been called for either candidate. A win for Mr. Biden would solidify his lead in the projected electoral college. President Trump requires 56 additional electoral votes to reach 270⁶ – he would need a win in Georgia, confirmations that he won Alaska (3 electoral votes) and North Carolina (15 electoral votes), an overturn of the Pennsylvania result (20 electoral votes), and a win in either Nevada (6 electoral votes) or Arizona (11 electoral votes). We do not believe this outcome is priced into the market and would be a short-term risk off event given the uncertainty.

Georgia Senate Run Offs

Georgia requires senate candidates to receive at least 50% of the overall vote to be confirmed the winner. ⁷There are two open senate seats in Georgia and the outcome is likely to decide who has the majority in the Senate. The voting for the Georgia runoffs takes place on January 5, 2021. See below for the Georgia Senate voting percentage through November 10^th; the Georgia Senate race will come down to Perdue (R) v. Ossoff (D) and Loeffler (R) v. Warnock (D).⁸

In the event the Republicans win the Senate races in Alaska and North Carolina, the Georgia races would determine who holds the majority in the Senate. Democrats would need to win both Georgia Senate seats to reach a 50-50 split (note: two independent Senators caucus with the Democratic party). The Vice President would be able to break any ties in the Senate.

Expectations for the Senate

Betting odds can be a useful sentiment indicator or to answer the question of “what’s priced into the market?”.⁹ Expectations are the Republicans maintain majority in the Senate. The Senate majority will influence key legislative items such as the next wave of fiscal stimulus, potential changes to the Tax Cuts and Jobs Act of 2017, and cabinet members to be selected by President-elect Biden.

If the Democrats take the Senate, the market will need to grapple with the short-term positive of more expected stimulus with the long-term consequences of higher corporate tax rates and/or higher capital gains tax rates. Republicans holding onto the Senate will push the “gridlock” narrative. The last time an incoming President did not have their party as majority in the Senate was in 1988 for George H. W. Bush; there has not been a Democratic President with a Republican Senate and Democratic House since 1884.¹⁰

Looking Out Beyond Georgia

Irrespective of the outcome for the Presidency, the result has been narrower than anticipated. Both candidates received over 71 million votes, with the two-party percentage split 51.66% to Biden and 48.34% to Trump. ¹¹ Going into the election, the Real Clear Politics polling average was Biden 51.2% and Trump 44.0%.¹² Whatever the outcome is of the US Government going into 2021, collaboration will be a key ingredient to bring all sides together. This will take on a larger importance if Congress is split as we alluded to in the prior paragraph. A divided government will present investors with fewer surprises and allow for the fundamentals of companies and asset classes to play out with less interference from geopolitical swings. Expect that environment to be more risk-on, all else equal.

The Masters

The Masters, “A Tradition Unlike Any Other”, is an annual statement used by CBS broadcaster, Jim Nantz. And in 2020, a year unlike any other, we have The Masters, in Augusta, GA, taking place in November (not April). Back to our title of “What Comes Next in Georgia”, look out for honorary starters Jack Nicklaus and Gary Player this Thursday, November 12^th.

Here are several fun facts from the Golfweek about The Masters.¹³

• Dwight Eisenhower is the only US president to have been a club member at Augusta National Golf Club.
• Every hole is named for a plant or shrub.
• The green jacket tradition started in 1937.
• The trees on Magnolia Lane are over 160 years old.

And since polling has had another up-and-down election season, let’s poll the audience on who they like going into the 2020 Masters. Here are a few prominent golfers going into the week.

• Bryson DeChambeau is the betting favorite. Remember he was the lead amateur back in 2016, finishing T21, his best performance at Augusta.
• Can John Rahm make the leap and win a green jacket? He’s talented, but so was Greg Norman and Ernie Els but they never got it done.
• Dustin Johnson was the 2019 runner-up. Last year, he played -12 on the Par-5s. Can he right his game on the Par-4s this year?
• Justin Thomas is a special iron player, but he’s never finished better than T12 at Augusta National.

¹ Source: ABC News, AP News, Fox News.

² Source: The Wall Street Journal, “Attorney General William Barr Tells Prosecutors They Can Pursue Election Probes”, November 9, 2020.

³ Source: crsreports.congress.gov.

⁴ Source: ABC News.

⁵ Source: AP News, “What would a recount in Georgia look like?”, November 6, 2020.

⁶ Source: The Wall Street Journal, AP News.

⁷ Source: The Wall Street Journal, “Georgia GOP Senate Candidates Call for Republican Secretary of State to Resign”, November 9, 2020.

⁸ Source: The Wall Street Journal, Associated Press. Note: Loeffler, Collins, and Warnock all ran in the same Senate race, and the top vote getter for each party advanced to the runoff.

⁹ Source: Bloomberg, PredictIt, through November 10, 2020.

¹⁰ Source: Strategas, Clifton, “2020 Election Wrap”, November 9, 2020.

¹¹ Source: The Wall Street Journal, AP News. As of November 10, 2020.

¹² Source: Real Clear Politics.

¹³ Source: Golfweek, USA Today.

Disclosures

Investment Solutions at Hightower Advisors is a team of investment professionals registered with Hightower Securities, LLC, member FINRA/SIPC, & Hightower Advisors, LLC a registered investment advisor with the SEC. All securities are offered through Hightower Securities, LLC and advisory services are offered through Hightower Advisors, LLC. This is not an offer to buy or sell securities. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public and internal sources; as such, neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This document was created for informational purposes only; the opinions expressed are solely those of the author, and do not represent those of Hightower Advisors, LLC or any of its affiliates.