27.10.2016

5 reasons why Trump will not win the election

by IG Bank

400After the big surprise of Brexit, anything seems possible. However, the presidential election in the United States is hardly comparable to the British referendum. The United Kingdom’s electorate consists of a large dominant block of white voters (94%), while in the US, there is much more diversity amongst voters with 30% ethnic minorities.

Minorities and women

No president before Trump’s candidacy has ever been so unpopular among minorities, with fewer than 20% Latinos and 3% African-Americans supporting him. That means that he will need to win the votes of a record share of white voters. Without the support of many women and university-educated people, that promises to be complicated.

Larry Sabato’s crystal ball shows Clinton as the clear winner

Larry Sabato, founder of the University of Virginia Center for Politics, is recognised for his 98% accuracy in predicting all races for president, the Senate, the House of Representatives, and governors since 2000. Sabato believes not only that Clinton will come out ahead, but also that the Democrats have a very good chance of taking back the Senate.

The aura of the outgoing president

Historically, outgoing presidents have played a greater role than might appear. Eight out of nine times, when the outgoing president’s approval rating was above 48% a month before the elections, the same party was re-elected. The exception was the year when Al Gore refused the support of Bill Clinton, whose image was tarnished following the Lewinsky affair. Six out of six times, when this percentage was below 48%, there was a change of power. Averaging 54% during the month of October, Obama is a sizeable ally for Hillary Clinton.

80% of polls favour Clinton

The polls show support for Clinton at more than 80%. According to one theory, many people who favour Trump dare not speak out, but even anonymous online polls show similar trends. According to Citigroup’s research, prediction markets betting websites give Trump only a 15% chance of becoming president.

The market isn’t convinced

Trump would represent a drastic shift in political trends and would raise many questions. However, the market does not reflect this uncertainty. If we look at election years since 1992, the point reached by the volatility index (VIX) this year is the lowest ever seen one month before elections. Such levels have only been seen when a sitting president was running for a second term (1996: Clinton; 2004: George W. Bush; 2012: Obama). So Wall Street is positioning itself in favour of Hillary Clinton, who seems to want to follow in the Obama administration’s footsteps. Similarly, the Mexican peso, which tended to weaken when Trump was rising in the polls, has gained more than 6% over the last three weeks.

ANDREAS RUHLMANN
Premium Client Manager / Market Analyst  - IG Bank

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