In this election year, the line between conspiracy theory and reality is slowly blurring. The most recent conspiracy theory that became reality was that Hillary Clinton was sick. Over the last few weeks, conservative leaning websites and Republicans talking heads have floated the idea that she had some serious illness. By extension, they went on to question her capability to serve as commander-in-chief.
Well, it turns out that Clinton actually is sick with pneumonia, although she was diagnosed with pneumonia many weeks after the chatter of her being ill began. This is unlikely to be the October Surprise many expect, but it does introduce another twist into one of the strangest U.S. Presidential campaigns in modern electoral history.
Interestingly, the 1980 election was the last time that a candidate who was trailing on October 1st, according to Gallup, went on to win the election. In the eight elections since 1980, the candidate that has led on October 1st has gone on to win the Presidency. So if history is any precursor, the next few weeks will be telling.
As the race stands today based on poll aggregates, Clinton is up by approximately 2.1 points. This is within in the margin of error and according to Nate Silver at 538.com gives Clinton a 65.0% probability of winning. If you are a Clinton supporter, this isn’t a terrible position except one small thing that we stock market operators deal with daily: momentum.
There is no denying Trump has the momentum. Whether it is Clinton’s sickness, a deflating of her post convention bounce, Trump just getting some verbal discipline, or recent miscues of Clinton’s, the poll numbers between the two candidates have narrowed meaningfully over the last month.
In the same period, Trump’s favorability has increased while Clinton’s has decreased. Both candidates remain two of the most unfavorable Presidential candidates ever with the delta between favorable and unfavorable at -13% and -19%, respectively.
Even though Clinton has led consistently and sometimes by a wide margin, this race will be close and Trump has a legitimate chance of winning. This view stands today. Ironically, the reason that Trump may have a real chance at winning is the demographic makeup of his supporters.
Many have critiqued Trump’s inability to attract minority voters as a likely death blow to his campaign. A recent CNN poll emphasizes this with Trump ahead in the white vote 54 – 33 and Clinton leading the minority vote 70 – 13. Far and away, Trumps polls the best with whites without a college degree and in that same CNN poll led that demographic by 66 – 23.
In a nation in which the growth minority segment of the population and electorate is outpacing the white portion, the pundits should be correct. Except for one small fact … the swing states are disproportionately white.
According to our partners at the non-partisan Cook report, they projected just over 70% of the electorate this election to be white. There are roughly 15 so called “swing states” and of those 15 states, 10 of them have more white voters than the national average (Arizona, Colorado, Iowa, Michigan, Minnesota, Missouri, New Hampshire, Ohio, Pennsylvania, Wisconsin). So, it’s not too difficult to see that if Clinton drives a lower minority turnout than President Obama (a reasonable assumption) and Trump can take a larger share of the White vote than Romney did, he may be better positioned than expected in the swing states.
The conclusion of all this? If you are expecting an October surprise, you shouldn’t (sorry Julian Assange!). The race is very close at the moment and if Trump can maintain his momentum the race will narrow even more. Since Trump does have a legitimate shot at winning, it’s time to start thinking through scenarios with either Trump or Clinton as President.
Daryl Jones is director of research at Hedgeye Risk Management.