The Iowa caucus today marks the official start of the US primary season. There is no credible challenger to President Trump on the Republican side and so this piece will set out the likely political timeline ahead as Democrats choose their candidate.
There are still eleven Democratic candidates. Of these, RealClearPolitics national polling averages suggest only Joe Biden (27.2%), Bernie Sanders (23.5%), Elizabeth Warren (15.0%), Michael Bloomberg (8.0%), and Pete Buttigieg (6.7%) are strong enough to be considered serious contenders. Andrew Yang (4.7%) and Amy Klobuchar (4.3%) are on the bubble, but Tom Steyer (1.8%), Tulsi Gabbard (1.5%), Michael Bennet (0.5%), and Deval Patrick (0.3%) simply lack the necessary support at this critical juncture that would allow them to contend.
In 2020, there will be 4750 total Democratic delegates. Of these, 3979 are pledged delegates and 771 are so-called superdelegates. A candidate needs a majority (1990) of pledged delegates to secure the nomination in the first round. If not, it goes to a second round.
In theory, superdelegates could overrule the will of the primary voters in a close race. In practice, however, that has never happened. According to the Washington Post, between 1984 and 2016, every candidate that won the most pledged delegates was also supported by the most superdelegates. The 2008 and 2016 Democratic primaries were particularly close in terms of pledged delegates but in both cases, the superdelegates mirrored the pledged delegates in supporting Obama and Clinton, respectively.
During the 2016 Democratic primaries, Bernie Sanders complained that the primary process favored Clinton. He felt the race was fixed because the superdelegates leaned heavily towards Hillary Clinton, and they also typically announce who they are supporting well before the convention. in 2016, Clinton already had several hundred superdelegates supporting her before the primary season even started. Sanders went even further by accusing the Democratic National Committee of favoring Clinton over him outright.
As a result of these complaints, the DNC tweaked the process. Unpledged delegates (superdelegates) can no longer vote in the first round of the primary process. If no candidate has a majority of pledged delegates then, unpledged delegates will vote in the second round to help chose the candidate.
In a state primary, the process is pretty straightforward. Like any election, voters simply go to the polls and cast their vote for their preferred candidate. Delegates are awarded proportionately to the top vote-getters, usually by the congressional districts that they won.
Caucuses are not so straightforward. Caucus-goers head to their designated precinct location to take part in what many see as a game of musical chairs. Participants divide themselves into groups based on their preferred candidate. A candidate must receive 15% support in the first round to be considered “viable.” The next round is known as realignment. Here, nonviable supporters can either move to a viable candidate or to a nonviable one that is close to the 15% threshold. After the realignment process is complete, viable candidates are allocated “State Delegate Equivalents” based on their performance, and the one with the most SDEs is considered the winner.
Some key changes have been made to the caucus process. The most important ones are that only two realignment rounds will be held (previously, many rounds were allowed) and candidates can no longer become unviable once they’ve been viable. Now, the candidates don’t have to worry about getting critical support peeled away in each realignment round. These changes should simplify and speed up caucuses.
There have been some other changes to the Democratic primary process since 2016. The main ones are: 1) the entire primary process has been sped up. Over 60% of the total Democratic delegates will be awarded by March 17, due in large part to the fact that California has moved to Super Tuesday from June previously, 2) there are fewer caucuses. Caucuses will only award 3% of the total Democratic delegates, down from 14% in 2016, and 3) superdelegates will no longer vote in the first round of primaries. This is meant to address complaints from the Sanders camp in 2016 that the establishment fix was in for Clinton.
February 3 – Iowa caucus (41 pledged delegates); RealClearPolitics Iowa polling averages suggest the frontrunners are Bernie Sanders (24.2%), Joe Biden (20.2%), Pete Buttigieg (16.4%), Elizabeth Warren (15.6%), and Amy Klobuchar (8.6%)
February 7 – Democratic debate in New Hampshire
February 11 – New Hampshire primary (24); RealClearPolitics New Hampshire polling averages suggest the frontrunners are Bernie Sanders (26.5%), Joe Biden (17.5%), Elizabeth Warren (14.3%), Pete Buttigieg (13.7%), and Amy Klobuchar (6.7%)
February 19 – Democratic debate in Nevada
February 22 – Nevada caucus (36); RealClearPolitics Nevada polling averages suggest the frontrunners are Joe Biden (25.0%), Bernie Sanders (19.3%), Elizabeth Warren (14.7%), Pete Buttigieg (7.7%), and Tom Steyer (7.3%)
February 25 – Democratic debate in South Carolina
February 29 – South Carolina primary (54); RealClearPolitics South Carolina polling averages suggest the frontrunners are Joe Biden (30.5%), Bernie Sanders (17.0%), Tom Steyer (16.5%), Elizabeth Warren (10.5%), and Pete Buttigieg (5.5%)
March 3 – Super Tuesday as fourteen states hold primaries with 1338 total pledged delegates up for grabs: Alabama (52), Arkansas (31), California (415), Colorado (67), Maine (24), Massachusetts (91), Minnesota (75), North Carolina (110), Oklahoma (37), Tennessee (64), Texas (228), Utah (29), Vermont (16), and Virginia (99 delegates); Democrats abroad and in Samoa add another 22 pledged delegates to total 1360
March 10 – Six states hold primaries with 338 total pledged delegates up for grabs: Idaho (20), Michigan (125), Mississippi (36), Missouri (68), and Washington (89); North Dakota caucus adds another 14 pledged delegates to total 352
March 17 – Four states hold primaries with 577 total pledged delegates up for grabs: Arizona (67), Florida (219 delegates), Illinois (155), and Ohio (136); Northern Marianas adds another 6 pledged delegates to total 583
At this point, over 60% of the total pledged delegates will have been awarded. If it is not yet clear who the nominee will be, all eyes will turn to a series of smaller primaries to be held in late March/early April in Georgia, Puerto Rico, Alaska, Hawaii, Louisiana, Wyoming, and Wisconsin. 347 pledged delegates will be up for grabs in this bunch
April 28 – Six states hold primaries with 663 total pledged delegates up for grabs: Connecticut (60), Delaware (21), Maryland (96), New York (274), Pennsylvania (186), and Rhode Island (26)
At this point, nearly 90% of the total pledged delegates will have been awarded. However, the final primaries will be held over the course of May and June that account for the remaining pledged delegates
July 13-16 – Democratic convention will be held in Milwaukee
Polls show Bernie Sanders doing well in Iowa and New Hampshire. His support may surge in later primaries and if this pans out, we suspect US equity markets will start to become more jittery. After all, Sanders is viewed as even further left of Warren. That said, many (including us) feel that these two early states have been given an inflated sense of importance. For instance, Sanders won New Hampshire and was nearly tied in Iowa back in 2016 but he ended up losing the nomination. Looking further back to 1992, Bill Clinton did not win a primary contest until Super Tuesday on March 3. That year, Tom Harkin won Iowa handily, while Paul Tsongas won New Hampshire. Given the still-crowded field, we will probably have to wait until after the March 17 primaries to get a clear picture of who the likely Democratic candidate really is.
Once the Democratic primaries are over, all eyes will turn to the head-to-head match-ups with President Trump. We downplay nationwide polls here, as we suspect the election will be fought and decided in the same battleground states that President Trump narrowly won in 2016. These were Michigan, Wisconsin, and Pennsylvania. Together, these three states account for 46 electoral votes. If all three had swung to Clinton, she would have won in 2016 by a margin of 278-260 rather than losing to Trump 232-306. Trump won Pennsylvania by around 68,000 votes, Michigan by around 12,000, and Wisconsin by around 27,000. Those three states (and thus the election) were decided by around 107,000 voters that allowed Trump to win with the narrowest of margins.
Once the Democratic candidate has been decided, we thus need to focus on the head-to-head matchups three states. Let’s throw in Florida for good measure since Trump won that state by only around 113,000 votes in 2016, accounting for 29 electoral votes. It’s certainly possible that Trump could lose the popular vote by an even larger margin than in 2016 (around 3 mln) and still win the necessary 270 electoral college votes. At this point, we believe markets have largely priced in a second term for President Trump.
Our base case remains that Biden wins the Democratic nomination. Of all the main contenders, Biden should be viewed as the most market-friendly and establishment, with wild card Bloomberg coming in a close second. Both Sanders and Warren would not be considered market-friendly by any stretch. Interestingly, Bloomberg is not trying to contend in the four early contests and is instead focusing on Super Tuesday (and beyond). He remains the biggest unknown and the calculus may change drastically in favor of him if Sanders or Warren outperform in the coming weeks.
It should be noted that betting markets think otherwise. RealClearPolitics betting average shows Sanders overtaking Biden in recent weeks. It remains to be seen whether this surge can be sustained but it certainly bears watching. Also noteworthy is Warren’s continued slump from her peak last fall, as well as Bloomberg’s slow and steady rise to number three. Stay tuned.
Lastly, polls suggest there are still a lot of undecided voters. Given the polarized nature of US politics right now, it’s hard to believe that close to 30% have not yet made up their mind about the 2020 election (see https://www.kff.org/other/issue-brief/data-note-swing-voters/). Recent work suggests these so-called swing voters tend to be younger, moderate, and less engaged in politics on a national level. This will make it even harder to predict the outcome of what is likely to be a contentious election cycle.
Above all else, we would like to emphasize that we are at the beginning of what is likely to be a long, protracted process of picking the Democratic nominee. After that is determined, markets will have another six months of major campaigning ahead of the November 3 election. We will strive to keep our clients informed of important trends in polling and voter intentions as this process unfolds.