It's all about Florida, North Carolina and Ohio.
For traders hoping to capitalize on volatility next Tuesday as the election results come trickling in, it may all be over by early evening, at least if Trump loses.
That is the calculation of Citi's Steven Englander, who determined that if Trump loses either Florida or North Carolina or Ohio "the math doesn’t work and it tells us that the shift to Trump was not as pronounced as feared."
Those states, marked in yellow in the table below, close at 7:00 or 7:30 ET. As Citi adds, even if Trump loses by a little in one of these states, it becomes almost impossible for him to win. It would take a tidal wave in a couple of states that look firmly Democrat.
Citi helpfully adds that "the odds that he loses, say a Florida or North Carolina, but wins a Pennsylvania do not seem high" at which point "vol collapses, MXN rallies and we go home early."
On the other hand, if Trump wins all these states then he still has to win a Pennsylvania, Michigan, Wisconsin, Minnesota, Colorado or New Mexico (shown in brown).
What happens then? Citi explains:
- Many of these close later and the odds are the outcomes will be tighter.
- Virginia also possible but less likely than some of the others.
- Asset markets will be very sensitive to news
- Market still not really pricing in substantial risk of Trump win, so we could see huge volatility both in MXN and in asset classes that so far have moved modestly on poll shifts.
- So we go home very late.
As a reminder, it took shocked markets a few hours to swing from a "priced-in" Remain victory, to the realization that Brexit was a winner, at which point S&P futures were briefly locked limit down, prompting an emergency announcement by the Bank of England and ECB that this aggression against the wealth effect would not stand, before everything returned largely to normal.
Here are Englander's parting words:
FWIW – the RCP electoral vote no-toss-up is now 273 for Clinton to 265 for Trump http://www.realclearpolitics.com/epolls/2016/president/2016_elections_electoral_college_map_no_toss_ups.html . Probably overstates Trump odds, but map makes it clear both that trend is shifting, but that he still has to win at least one state that so far looks firmly Democrat.
Perhaps, the take home message here is that Wall Street is still firmly convinced that Hillary Clinton will be the next president.