https://www.forbes.com/sites/christosmakridis/2020/11/11/georgia-recount-fuels-market-uncertainty-about-election-outcomes/?sh=60ad51145e43
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Georgia Recount Fuels Market Uncertainty About Election Outcomes Christos Christos Makridis ContributorI am a professor & policy adviser, writing about behavioral economics. Although the Associated Press announced on November 7th that Joe Biden received enough votes to launch him over the top for president of the United States USM +1.2% based on the results from Pennsylvania, the actual political landscape is much more uncertain. States have not yet certified their results and more data irregularities and voter fraud are emerging. In fact, many states are even headed towards automatic recounts and Georgia just announced a hand recount.
The combination of statistical anomalies and documented evidence of fraudulent activity has led to an increase in uncertainty and held back much of the increase in sentiment that typically follows an election.
Markets Are Still UncertainImmediately following the media’s announcement of a winner, markets rallied. But, that reflects the perception of an election coming to a close more than anything else unique to the candidate.
Since the initial announcement, however, uncertainty has spiked. For example, using natural language processing techniques on news outlets and social media, the figure below reveals significant volatility in political sentiment. While we’ve seen big swings in political sentiment before, the volatility we’re now observing is even larger than in 2016 preceding and following the 2016 election.
Many data irregularities have emerged in the past couple days. That’s part of what has led the Department of Justice to authorize inquiries into voter irregularities yesterday. Although some have critiqued Barr for pursuing these inquiries for political purposes, the fact remains that they are looking for answers. Moreover, Senator McConnell defended these inquiries, remarking that "we have the system in place to consider concerns, and President Trump is 100% within his rights to look to allegations of irregularities and weigh his legal options.
What effect might political uncertainty have on the real economy? Following the 2016 election, my research shows that consumption among conservatives surged, whereas consumption among Democrats remained fairly constant. Although consumption data of that scale is not available now, we can alternatively look at an index of consumer sentiment. Interestingly, whereas it surged following the 2016 election, it has remained flat this time around.
Understanding The Volatility in UncertaintyClearly, something is wrong with our election process, including, but not limited to: over 10,000 dead people who presumably cast their ballots in Michigan; software "glitches" in Michigan, Georgia, and Pennsylvania all by Dominion Voting Systems that's been rejected multiple times for use in Texas; deviations in the vote counts from the distribution that one would expect in a fair election.
Moreover, what matters for driving uncertainty is the location of these anomalies. If they were concentrated in strong Democrat or Republican states, such as California or Texas, then the market would not be as responsive since the anomalies would have to be sufficiently large to sway the outcome. But, since the evidence resides in battleground states it carries even greater weight.
Consider, for instance, the fact that Georgia just announced that they will do a recount. Since the current margin is already incredibly close—with Biden at 49.5% and Trump at 45.2%—a small change could have large effects. In fact, in Gwinnett County, software “glitches” with Dominion Voting Systems affected over 80,000 ballots, which is more than enough to sway the outcome. These margins and legal battles are also present in other states, compounding the uncertainty.
In brief, while some have argued that fraud happens in every election and that it is not any different this time around, a new website just launched, EveryLegalVote.com, which is devoted to educating the public about voter fraud and disentangling valid versus innocuous claims. Their website also includes hundreds of videos from people who reported video evidence and personal accounts of suspicious behavior and fraud, arguing that it’s actually quite pervasive.
Time will tell, but so far markets look uncertain. Until these anomalies and incidents are reconciled, markets are unlikely to take off.
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