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Research USDemocratic Party primaries and caucuses – an overview
13 February 2020
Investment Research – General Market Conditions
Important disclosures and certifications are contained from page 27 of this reportwww.danskebank.com/CI
Senior AnalystMikael Olai Milhø[email protected] +45 45 12 76 07
22
• According to prediction markets, Bernie Sanders is now favourite to win the US Democratic Party nomination. He is also ahead in the opinion polls. That said, Sanders did not perform as well as expected in Iowa and New Hampshire.
• Joe Biden has collapsed in opinion polls and now only has a 10% chance of winning the nomination, according to prediction markets (40% previously). Pete Buttigieg and Michael Bloomberg are now the dark horses. Elizabeth Warren seems to us far away from winning the nomination.
• Watch out for Super Tuesday on 3 March, when 1,344 pledged delegates are due to be found (34% of the total). Other big days are 17 March and 28 April (577 and 663 pledged delegates, respectively).
• Due to the reform of the Democratic Party’s nomination system, the magic number for winning the nomination is 1,990 of the 3,779 pledged delegates (superdelegates are not allowed to vote then).
• According to the most recent opinion polls, Donald Trump seems to be running slightly behind but, in our view, it is too early to draw significant conclusions before the Democratic presidential candidate is found. However, according to prediction markets, Trump is expected to be re-elected.
• What one should really focus on is the Congress. At the moment, the most likely scenario seems to be a divided Congress, with the Democrats retaking the House and the Republicans retaking the Senate.
• In the event of a divided Congress, the economic and financial implications should be limited, as it would make it difficult for the President to get his/her (economic) policy through Congress. This limits the prospect of a significant change to economic policy in either direction.
• However, remember that the US President can act more easily without Congressional support on foreignand trade policies.
Key takeaways
Process, calendar and polls
44
* Source Wikipedia , Reuters
• The Democratic Party presidential primaries and caucuses are indirect elections, with voters in each constituency electing delegates to the Democratic National Convention, where the party elects its president candidate.
• There are 57 constituencies (50 states, DC, territories and Democrats Abroad) – 50 primaries and seven caucuses.
• Caucuses are held in three states (Iowa, Nevada, Wyoming) and four territories. Caucuses require voters to vote in the open (raising their hand or gathering with other voters) and are very time consuming.
• In primaries, voters attend polling stations and vote for their preferred candidate (secret voting).
• The Democratic Party presidential primaries and caucuses elect a total of 3,979 delegates, who have pledged to vote for a specific candidate depending on the election result.
• There are also 771 unpledged superdelegates automatically chosen by the party, rather than by the results of primaries and caucuses (party leaders, former presidents, vice-presidents, Democratic members of the House of Representatives, Democratic members of the Senate, Democratic governors, etc.). However, many superdelegates say publicly who they are supporting ahead of the convention.
Process – primaries and caucuses*
55
* Source: Wikipedia, Reuters, Vox, 270towin
• The Democratic National Convention is scheduled to be held from 13-16 July in Milwaukee, Wisconsin.
• There will be a total of 4,750 delegates (3,979 pledged delegates and 771 superdelegates).
• IMPORTANT NEW RULE: Superdelegates no longer have the right to vote in the first ballot at the Democratic Party Convention unless one of the nominees has enough support to win the nomination in the first round with pledged delegates alone.
− If a single candidate wins at least 50% of the total of 4,750 delegates (=2,375) (supermajority around 60% of all pledged delegates), superdelegates are allowed to vote in the first vote, as they cannot overturn the result.
− If a single candidate has more than 50% of the 3,979 pledged delegates (=1,990), the superdelegates are not allowed to vote in the first vote.
− If no candidate has a simple majority of the pledged delegates, there will be a second vote, where all delegates become unpledged delegates and superdelegates are allowed to vote. For the subsequent votes, a majority of all 4,750 delegates (2,376) is needed to secure the nomination. We expect many attempts to make behind-the-scenes deals.
Process – Democratic National Convention*
66
Source: Wikipedia
Calendar
Pledged delegates % cumulative
03-Feb Iowa caucuses 41 1.0
11-Feb New Hampshire primary 24 1.6
22-Feb Nevada caucuses 36 2.5
29-Feb South Carolina primary 54 3.9
03-Mar
SUPER TUESDAY (Alabama, American Samoa, Arkansas, California, Colorado, Maine, Massachusetts,
Minnesota, North Carolina, Oklahoma, Tennessee, Texas, Utah, Vermont, and Virginia
primaries/caucuses)
1344 37.7
10-MarDemocrats Abroad, Idaho, Michigan, Mississippi, Missouri and Washington primaries; North Dakota firehouse caucuses
365 46.8
14-Mar Northern Mariana Islands caucuses 6 47.0
17-Mar Arizona, Florida, Illinois and Ohio primaries 577 61.5
24-Mar Georgia primary 105 64.1
29-Mar Puerto Rico primary 51 65.4
04-Apr Alaska, Hawaii and Louisiana primaries 107 68.1
07-Apr Wisconsin primaries 84 70.2
28-Apr Connecticut, Delaware, Maryland, New York, Pennsylvania and Rhode Island primaries 663 86.9
02-May Kansas primary; Guam caucuses 46 88.0
05-May Indiana primary 82 90.1
12-May Nebraska and West Virginia primaries 57 91.5
19-May Kentucky and Oregon primaries 115 94.4
02-Jun District of Columbia, Montana, New Jersey, New Mexico, and South Dakota 215 99.8
06-Jun US Virgin Islands caucuses 7 100.0
13-16 July Democratic National Convention
24-27 Aug Republican National Convention
03-Nov Election Day
2020 Election Calendar
77
Source: Wikipedia
65% of the pledged delegates to be found by the end of March;
87% by the end of April
0
20
40
60
80
100 Accumulative % of pledged delegates
Super Tuesday 3 March1,344 pledged delegates(34% of total)
88
Source: RealClearPolitics, Macrobond Financial
Sanders ahead in opinion polls amid Biden collapse
99
Source: RealClearPolitics, Macrobond Financial
Combined, moderate candidates have more support than left-wing
candidates
1010
Source: PredictIt, Bloomberg, Macrobond Financial
Prediction markets expect Bernie Sanders to win the nomination
1111
Source: RealClearPolitics
Close race between Trump and any Democratic candidate
according to latest national polls (very volatile polls)
Democratic candidates - views
1313
Source: Politico https://www.politico.com/2020-election/candidates-views-on-the-issues/
The economy
CandidateRaise minimum
wage from $7.25 to $15
Wall street taxes
Increase capital gains
tax rate
Increase corporate income tax
Expand the earned income
tax creditWealth taxes
Increase infrastructure
spending
Biden Yes N/A YesHigher but below 35%
N/AIncrease upper-
income taxesYes, fund with
tax money
Bloomberg Yes N/A YesHigher but below 35%
Yes YesYes bot no
stated funding mechanism
Buttigieg Yes N/A N/A Back to 35% YesIncrease upper-
income taxesYes, fund with
tax money
Sanders YesTax on financial
tradesYes
Eliminate tax breaks for offshoring
N/A YesYes bot no
stated funding mechanism
Warren YesHigher taxes on
financial institutions
YesRaise taxes on some beyond
2017 rateN/A Yes
Yes, fund with tax money
Economy
1414
Source: Politico https://www.politico.com/2020-election/candidates-views-on-the-issues/
Trade
CandidateUse tarrifs to
pressure countries?
TPPTrump's revised
NAFTA dealChina
Biden No Supports Support Don't worry so much
Bloomberg N/A N/A Support N/A
Buttigieg No Opposes SupportSupport the goal, change the approach, e.g. adress China together with Japan
or European Union
Sanders Yes Opposes OpposesSupport the goal, change the approach, e.g. adress China together with Japan
or European Union
Warren Yes Opposes SupportSupport the goal, change the approach, e.g. adress China together with Japan
or European Union
Trade
1515
Source: Politico https://www.politico.com/2020-election/candidates-views-on-the-issues/
Healthcare
Candidate Medicare Drug Costs
Biden Build on the ACA's foundation Link prices to overseas prices
Bloomberg N/AAllow importation of drugs sold at lower prices
overseas and allow government to break patens in order to make cheaper generics
Buttigieg Rethink the current systemAllow importation of drugs sold at lower prices
overseas and allow government to break patens in order to make cheaper generics
Sanders All in on Medicare for allGovernment board set prices and allow others
to produce the drug if the company does not same the same price as overseas
Warren All in on Medicare for allPrice control and make a government-run
pharmaceutical manufacturer
Health
The Presidential Election – an overview
1717
Trump’s approval rating is quite stable Democrats are ahead in polls
Democrats ahead in Congress generic ballot polls amid stable
approval rating
Source: FiveThirtyEight, Macrobond Financial Source: FiveThirtyEight, Macrobond Financial
1818
Source: RealClearPolitics, Macrobond Financial
Trump’s job approval on economy is at its highest level
1919
Source: FiveThirtyEight https://projects.fivethirtyeight.com/trump-approval-ratings/
Trump’s approval and disapproval ratings are both very stable
compared with those of former Presidents
2020
Swing states most important
Trump is expected to win, according to prediction
markets
270 electoral votes to win the presidency
• There are 538 electoral votes in total (‘mostly winner takes it all’ across states).
• A candidate needs at least 270 electoral votes to become President.
• We already know the outcome of many states, which are either solid blue or red states. Focus is on the swing states (see overleaf).
Source: PredictIt, Macrobond Financial
2121
Sources: Morning Consult, Wikipedia, Politico
Trump’s net approval has declined in most swing states
State Trump Hillary
Ohio 52.1 43.5 8.6 -1 -16 18 Farm state
Iowa 51.8 42.2 9.6 -9 -18 6 Farm state
Georgia 51.3 45.6 5.7 0 -18 16
North Carolina 50.5 46.7 -3.8 -1 -19 15
Arizona 49.5 45.4 4.1 -1 -21 11
Florida 49.1 47.8 1.3 -1 -21 29
Pennsylvania 48.8 47.6 1.2 -2 -11 20
Wisconsin 47.9 46.9 1.0 -10 -16 10 Farm state
Michigan 47.6 47.3 0.3 -12 -20 16 Auto state
New Hampshire 47.2 47.6 -0.4 -12 -14 4
Nevada 45.5 47.9 -2.4 -15 -25 6
Minnesota 45.4 46.9 -1.5 -7 -10 10 Farm state
Maine 45.2 47.9 -2.7 -7 -15 4
Virginia 45 49.9 -4.9 -4 -11 13
Colorado 44.4 47.2 -2.8 -10 -11 9
% of votes in 2016 election Change since Trump
took office, points
Electoral
Votes in state
Trump net approval
rating (Jan 2020)
2016 election,
Trump vs Hillary (net)
Note: Sorted by Trump’s vote share in 2016
2222
Source: Politico
Presidential Election – timetable
3 November: Election Day
29 September: Firstpresidential debate
7 October: Vicepresidential debate
15 October: Secondpresidential debate
22 October: Third and final presidential debate
20 January 2021:
Inauguration of new president and vice president
2323
For majority Democrats need 16, Republicans 21
Senate map does not look promising for the Democrats*
Republicans hold 23 of the 35 seats up for election
• One hundred seats, two from each state. Republican majority currently. Thirty five seats up for election.
• Of the 35 seats up for election, 23 are held by Republicans and 12 are held by Democrats.
• There is still a long way to the so-called super majority of 60 seats, which makes the legislation process easier (prevents filibustering).
• Three of four toss-up states are currently held by Republicans.
• Democrats need to win 16 seats of 35 to get a majority, Republicans need 21 ➔ As many of the 23 are lean or solid Republican, it is possible that the Democrats will win but the Senate map is more difficult than it seems to be.
• This increases the likelihood of a divided Congress, which complicates legislation.
D, up R, up R, not up D, not up
35
23 12
30
7 4 4 9 11
Solid D Likely/lean D Toss-upLikely/lean R Solid R
*Source: 270towin, Wikipedia
2424
Source: PredictIt, Bloomberg, Macrobond Financial
Around 70% probability of the Republicans controlling the
Senate, according to prediction markets
2525
179 44 20 37 156
Solid D Likely/lean D Toss-upLikely/lean R Solid R
• There are 435 seats in the House of Representatives, distributed among states relative to population size.
• All 435 seats up for election every other year but re-election ratio is high.
• Need 218 seats for a majority.
• Based on model predictions, the Democrats are likely to retake the House.
• If predictions of a divided Congress are right, it
means it is very difficult for the President to get
his policy through and the impact on the
economy and financial markets should be
limited.
Democrats on track to retake the House
Democrats have the majority in the House
Democrats likely to retake the House
Source: 270towin, Wikipedia
232197
51
Democrats Republicans
Vacant Independent
Source: 270towin, Wikipedia
2626
Source: PredictIt, Bloomberg, Macrobond Financial
Around 40% probability of the Republicans controlling the House,
according to prediction markets
2727
Disclosures
This research report has been prepared by Danske Bank A/S (‘Danske Bank’). The author of this research report is Mikael Olai MIlhøj, Senior Analyst.
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Date of first publication
See the front page of this research report for the date of first publication.
2828
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Report completed: 12 February 2020, 21:45 CETReport first disseminated: 13 February 2020, 06:45 CET
