Super Tuesday has come and gone. Bloomberg has suspended his campaign after an extremely poor showing, and Warren is expected to follow suit soon. Here is our updated take on the likely Democratic candidate.
Biden exceeded expectations on Super Tuesday. He won Alabama, Arkansas, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee, Texas, and Virginia and leads in Maine. Sander won Colorado, Utah, and Vermont and leads in California. As things stand now without California and Maine finalized yet, Biden has 404 delegates vs. 340 for Sanders (according to the New York Times). Sander may close that gap once California’s 415 candidates have been distributed.
Bloomberg pulled out today and threw his support behind Biden. He had previously pledged to continue spending ad money that targets President Trump. Warren is widely expected to withdraw soon and throw her support behind Sanders in what looks to become a very competitive two-person race.
There is still a lot of time to go, but one possible outcome is that neither Biden nor Sanders win an outright majority. If no candidate wins a majority of the pledged delegates in the first round of voting at the Democratic convention in July, then unpledged will vote in the second round to help chose the candidate. During the 2016 Democratic primaries, Bernie Sanders complained that the primary process favored Clinton, which resulted in the rule change whereby superdelegates cannot vote in the first round. We can imagine Sanders complaining once again of a rigged contest if the superdelegates award the Democratic nomination to Biden. If so, it would take a monumental effort to unite the Democratic Party behind Biden.
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.
REMAINING POLITICAL TIMELINE
For the 2020 primaries, 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. Once the Super Tuesday results have been finalized, nearly 40% of the total delegates will have been awarded. The following two Tuesdays will account for two more big chunks of delegates (see below).
March 10 – Six states hold primaries and a caucus with 338 total pledged delegates up for grabs: Idaho (20), Michigan (125), Mississippi (36), Missouri (68), and Washington (89) hold primaries; 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
Today’s equity rally is being partly driven by the Super Tuesday results. That is, markets see Biden’s chances of being the Democratic candidate rising sharply, who is clearly favored over Sanders in terms of economic policies and orthodoxy.
As we wrote last month, our base case remains that Biden wins the Democratic nomination. Of all the main Democratic contenders, Biden is viewed as the most market-friendly and “establishment.” Bloomberg could also have made this assertion, though that is now moot after he suspended his campaign. To state the obvious, Sanders would not be considered market-friendly by any stretch.
Betting markets have finally come around to our view. RealClearPolitics betting markets average had shown Sanders overtaking Biden in recent weeks, but that has sharply reversed this month. Biden’s odds of winning the nomination now stand at a whopping 78%.
Once the Democratic primaries are over, all eyes will turn to the head-to-head match-ups with President Trump. We would downplay nationwide polls, 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. Let’s throw in Florida for good measure since Trump won that state by only around 120,000 votes in 2016, accounting for 29 electoral votes.
At this point, we believe markets have largely priced in a second term for President Trump. It’s certainly possible that Trump could lose the popular vote by an even larger margin than in 2016 (by around 3 mln) and still win the necessary 270 electoral college votes. However, today’s price action suggests markets would be equally happy with a Biden presidency.
Above all else, we would like to emphasize that we are still near 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 few 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.