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Setting the Record Straight on Three Election Scenarios Thumbnail

Setting the Record Straight on Three Election Scenarios

In four of the last five presidential elections, the Democratic and Republican candidates were separated by just 5% of the popular vote. And, in two of those four elections, the winner of the popular vote lost the Electoral College.

So, while there’s a lot of anxiety surrounding just how close next month’s election might be, it’s worth noting that our country has made it through some very tight races in recent years. Moreover, if you dig a little deeper into the framework that our Founding Fathers designed, you’ll find some extra layers of contingency planning that can guide us through some complicated election scenarios and ensure that our government keeps functioning.

We hope that by talking through three of these election scenarios on today’s episode, we’ll help dispel some misconceptions, alleviate some worries, and provide some advice on how to keep the next month in U.S. politics in perspective when you’re thinking about your financial plan.

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1. A lengthy vote count.

I think if I could sum up what most folks are worried about in one word, it’s “chaos.” Passions are running high on both sides of the political spectrum. Add in lingering uncertainty from Covid-19, social justice protests, and market volatility, and there is a feeling that this election could become a calamity we’re not prepared to deal with.

The reality, however, is that the U.S. Constitution and state laws will be able to cope with a variety of election scenarios.

The first, and perhaps most likely, is that it takes a long time to count votes due to high voter turnout and an increase in mail-in votes. It’s worth nothing that 40% of all votes in the 2016 election were cast via mail, so the states do have apparatuses in place to collect and count large numbers of mail-in votes. But if mail-in voting surges due to the pandemic, this might be another instance of Covid-19 disrupting our norms. Instead of staying up a little later on Election Night to see who won, we might have to wait a couple days while key states finish counting.

2. Recounts.

Some states automatically recount their votes if the margin separating the two candidates falls inside a specific threshold. The rules by which a losing candidate or concerned voting group can request a recount also vary from state-to-state.

Two of the most famous recounts in presidential elections occurred in 1960, when John F. Kennedy defeated Richard Nixon, and in 2000, when George W. Bush defeated Al Gore. The 1960 election didn’t move the needle much on the economy. In 2000, the markets dipped around 8% as Florida dealt with its famous “hanging chads” and challenges worked through the courts. The U.S. economy was probably at a peak during this election and heading towards a downturn anyway, so it’s hard to judge just how much the election affected the markets.

3. Lengthy legal challenges.

It took about a month of recounts and legal battles before the Supreme Court finally decided Bush v. Gore in December of 2000. The election scenario that’s causing the most concern now is a hypothetical legal battle between President Trump and Vice President Biden that takes even longer than that. Could we be leaderless as the calendar flips to 2021?

According to the Constitution, no.

First, regardless of what kind of spin some politicians or talking heads might put on the process, the states have more than a month to count their ballots before they’re required to cast their Electoral College votes on December 14th. If neither candidate gets the 270 votes required to win, the 12th Amendment says that the new Congress that’s sworn-in in January of 2021 is tasked with carrying out a contingent election. The House of Representatives elects the President, and the Senate elects the Vice President. The last time this happened was the 1825 election of John Q. Adams.

If the contingent election fails to produce a president before Inauguration Day, then the 20th Amendment seats the Vice President elect as President until the House makes its decision. And if the Senate hasn’t chosen a Vice President yet, then the Speaker of the House serves as President. And if the Speaker of the House is unable to …

OK, you get the picture. Even if this election turns out to be the closest in history, even if the candidates fight the results in court, the Constitution will, eventually, lead us to a president.

Now, just because we have a system, that doesn’t mean working through any of these election scenarios won’t be contentious. But no matter how hot things get on cable news or your social media, I urge you to separate your political beliefs from your financial planning. A win for your preferred candidate does not guarantee that your portfolio is going to skyrocket; a win by his opponent does not mean that you should sell all your stocks before an inevitable crash.

Market history tells us that, yes, we might be in for a few more bumps before Inauguration Day. But it also tells us that whoever our next president is, the financial plan that you and your fiduciary advisor have crafted is one of the best strategies to keep building wealth for your family.

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About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

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