With the seemingly interminable campaigning for the midterms, which began shortly after President Trump's inauguration, finally behind us, investors are watching with baited breath as Americans head to the polls for a midterm vote that's expected to bring out the highest vote tallies for an off-year election in recent memory. Donors have poured a record amount of capital into the race - all told, Republican and Democratic candidates are expected to spend some $5 billion, according to early projections. The 2018 midterms will be remembered for the surging interest among female voters (much ink has been spilled about how white women betrayed their fellow women by largely favoring Trump in 2016) and the 256 women who won major party primaries in races for the House and Senate.
With polls opening at 6 am in most East Coast states, we've put together a summary of bellwether races that political analysts - and investors - will be keeping a close eye on. But just because many of these races are happening in the eastern time zone (Florida and Virginia are two early bellwethers), doesn't mean that the results will be in early. It's possible that control of Congress might not be settled until later this week (of course, the final tally could take even longer to settle if there are recounts). In fact, if the results are still close, it could come down to California and its seven competitive House races, which, in a worst-case scenario for Democrats, could take days or even weeks to finalize as mail-in ballots are counted.
It’s possible that control of Congress is settled before midnight, but the unusually large number of close contests, many in states known for slow ballot counting, means the first midterm of Donald Trump’s presidency could go into overtime, perhaps for days after Nov. 6.
With that in mind, here are nine races - three for the House and Senate, and three for the governorship - that investors will be watching closely. All told, voters will cast ballots for 435 House seats, 35 senate seats and 35 governorships.
Republicans are expected to expand their majority in the upper chamber on Tuesday, largely thanks to the sheer number of red-state Democrats who are running to defend seats in states that President Trump carried by double-digit margins in 2016. According to one recent poll, Senate Republicans could expand their 51-50 majority to 56-45. New York Magazine's Intelligencer blog offered a succinct summary in a post published last week.
The basic reality is this: Using Cook Political Report ratings, there are eight competitive Senate races for seats currently held by Democrats, six of them in states carried by Donald Trump in 2016, and five competitive Senate races in states currently held by Republicans, four of them in states carried by Donald Trump in 2016. To put it another way, Trump carried 10 of the 13 states with competitive Senate races this year, and Democrats are defending significantly more of those seats than are Republicans. But that actually understates the challenge to Democrats. Trump carried four of these competitive Senate states (Montana, North Dakota, Tennessee, and West Virginia) by more than 20 points, and another three (Indiana, Mississippi, and Missouri) by more than 15 points. Two of the three states in this group won by Clinton (Minnesota and Nevada) went for her by less than three points. The one solidly Democratic state on the list (New Jersey) has a scandal-plagued Democratic incumbent with terrible favorability numbers. This map is about as red as it could be.
While the Cook Political Report expects Dems to pick up between 20 and 40 seats in the House, the odds that they win the two Senate seats needed flip control of the Upper Chamber are much more slim. Political polling site 538 puts the odds at 10%. Below are three races to watch.
Indiana - Joe Donnelly [D] vs. Mike Braun [R] (courtesy of the Guardian):
Democrat Joe Donnelly is trying to fend off Republican Mike Braun in a state that Trump won by 19%. Indiana’s lone statewide-elected Democrat has sought to align himself with Trump on the hot-button issue of expanding the border wall with Mexico. Otherwise, he has portrayed himself as a moderate who works with both parties to pass legislation. “I go against my party all the time,” he said recently.
Arizona - Kyrsten Sinema [D] vs. Martha McSally [R] (courtesy of the Guardian):
Democrats have high hopes for flipping this seat, where representative Kyrsten Sinema is running against Republican representative Martha McSally for the seat left open when Jeff Flake, a sharp critic of Trump, opted to retire, acknowledging that he could not win a primary in the current political climate.
McSally is a former air force fighter pilot who represents a moderate district based in Tucson. Sinema represents a district in the Phoenix suburb of Tempe and is a former Green party activist who transformed herself into a centrist Democrat.
Florida - Bill Nelson [D] vs. Rick Scott [R] (courtesy of CBS News):
...[I]ncumbent Democratic Sen. Bill Nelson is defending his seat against Republican Rick Scott, the current governor. The CBS News Battleground Tracker poll showed them tied for support among likely voters, each with 46 percent support.
The Florida Senate race is one of the most important in the country, and a victory for Nelson or Scott could help determine the partisan balance of the Senate. While the candidates have addressed national issues such as health care and immigration, local concerns are also playing an important part in the race, such as post-hurricane recovery and the influx of toxic "red tide" algae into Florida's waters.
Virginia's 7th Congressional District - Abigail Spanberger [D] vs. David Brat [R] (courtesy of NBC News):
The race pits incumbent Republican Rep. Dave Brat against Democrat Abigail Spanberger, a former CIA undercover operative and first-time candidate. Brat, who ousted House Majority Leader Eric Cantor in a 2014 primary upset by using anti-immigration attacks, was an early adopter of the brand of identity politics that now define the GOP in the Trump era.
Spanberger, who began her career as a federal law enforcement officer working narcotics and money laundering cases, is emphasizing her national security credentials and vowing to focus on health care and prescription drug costs, student loan debt and modern infrastructure.
The race is seen as a bellwether for whether college-educated suburban voters — especially “Panera moms” who traditionally vote Republican — will repudiate Trump and his brand of politics by voting Democratic or staying home.
Kentucky's 6th Congressional District - Amy McGrath [D] vs. Rep. Andy Barr [R] (courtesy of the Guardian):
A Lexington-area battle is one of the most competitive and expensive races in the country, pitting the third-term Republican Andy Barr against Democrat Amy McGrath, a retired US marines fighter pilot. Trump won the sixth district by more than 15% in 2016 but with the help of carefully shaped campaign ads that went viral, McGrath holds the edge on campaign fundraising. Polls are virtually deadlocked.
Florida's 27th District - Donna Shalala [D] vs. Maria Elvira Salazar [R] (courtesy of the Guardian):
National Republicans and Democrats are pouring major resources into the Miami-area 27th district, held since 1989 by the retiring Republican Ileana Ros-Lehtinen. The Democratic nominee, Clinton administration health secretary Donna Shalala, has ramped up her Spanish-language advertising and Hillary Clinton campaigned for her. But she’s facing a stiff challenge from Maria Elvira Salazar, a Cuban-American former broadcast journalist who, unlike Shalala, speaks Spanish. Though Trump won Florida in 2016, Clinton won this congressional district by nearly 20%.
Florida - Andrew Gillum [D] vs. Ron DeSantis [R] (courtesy of the Washington Post):
Voters are deciding whether to keep Florida under Republican control with a close Trump ally or elect its first Democratic governor since 1994 — and the first African-American ever — after a campaign marked by a deadly hurricane and gun violence.
Former Republican U.S. Rep. Ron DeSantis is hoping to ride President Donald Trump’s backing to victory in the governor’s race Tuesday, while Democratic Tallahassee Mayor Andrew Gillum has sought to energize his party’s voters as an unabashed liberal.
Gillum’s path to the nomination was a surprise, winning against four better-funded challengers. Hurricane Michael pulled him off the campaign trail in early October when it left nearly all of Florida’s capital without power. He again rushed home Friday, canceling campaign events after a man shot six people at a yoga studio, killing two before taking his own life.
DeSantis won the primary against better-known and better-funded Agriculture Commissioner Adam Putnam based largely on Trump’s endorsement. Trump visited Florida twice in the final six days of the election to try to boost turnout.
Georgia - Stacey Abrams [D] vs. Brian Kempe [R] (courtesy of Newsday):
Democrat Stacey Abrams is vying to become Georgia's governor, and would be the nation's first African-American female governor. Georgia Secretary of State Brian Kemp is a Republican who embraces Trump.
What will matter more: winning voters in the middle or turning out the base?
The campaign has been overshadowed by racial issues in its final weeks. Abrams, a former Georgia House minority leader, has blasted Kemp's performance as the state's chief elections officer, joining voting rights advocates in accusing him of using his post to make it harder for citizens, particularly minorities, to vote. Kemp maintains he's merely following federal and state election laws.
Something to watch: Does the little-noticed third-party campaign of Libertarian Ted Metz get enough votes to prevent either Abrams or Kemp from surpassing 50 percent? If neither one does, under Georgia's election law, they'd face a runoff on Dec. 4 – extending the campaign for nearly another month.
Kansas - Kris Kobach [R] vs. Laura Kelly [D] (courtesy of Fox News):
Nationally, Kansas has been a reliable state for Republicans. Trump bested Democratic contender Hillary Clinton by about 21 points in the 2016 election.
But Kansas Secretary of State Kris Kobach is facing a tough campaign against longtime state Sen. Laura Kelly. Whoever wins will replace Republican Jeff Colyer, who took over the position once Trump selected Gov. Sam Brownback to serve in his administration. Colyer ran for a full term but was defeated in the GOP primary by Kobach.
Kobach is a staunch ally of the president, who has endorsed him in his gubernatorial bid. He was the vice chairman of the White House’s controversial voter fraud commission, which was dismantled by Trump earlier this year as it faced multiple legal battles and opposition from states. He’s advocated for tough state policies against immigration and has promised to shrink state government and cut taxes.
Although pollsters largely expect Democrats to achieve the net gain of 23 seats needed to take control of the House. However, the Cook Political report shows that Democrats are only favored to defeat 18 sitting Republicans. Dozens more races are seen as tossups. Meanwhile, Republicans are expected to win two Democratic seats. This means that Dems will need to also win at least eight of the 'tossup' races to cement their dominance in the lower chamber. In terms of how the outcome might impact markets, Mohamed El-Erian, chief economic adviser at Allianz SE, said markets have largely priced in Democrats taking the House after the 'Shocktober' collapse in equity prices. Stocks could rally if Republicans successfully retain their majorities in both chambers, as investors see scope for further tax cuts. However, if Democrats with the House and the Senate, investors might panic on the expectation that the Dems would seek to undo large chunks of the Trump agenda.
Notably, the only major polling company projecting that Republicans will retain control of the lower chamber is Rassmussen reports, which was also the only major polling firm to call 2016 for Trump (per Real Clear Politics):
While the reality of the vote leaves plenty of room for nuance, here's a handy flow chart of the most probable outcomes, and their implications for policy and markets, courtesy of ING.
But while pollsters like Nate Silver have thrown up their hands in frustration as they worry about being egregiously wrong for the second election in a row, there's only one thing they can say for sure...
....Somebody is definitely going to win on Tuesday.