The Hurdle before Santa Rally?

Macro Perspectives: Mon 14 Dec 2020

The media has given little coverage of the election dispute and the markets has been giving little respect to the associated risk to market stability. That said, we entered the weekend with eighteen states supporting a lawsuit brought by Texas, against four swing states, and it sits with the Supreme Court.

This would be a narrow focus for the Supreme Court. It would be about interpreting the constitutionality of state officials changing voting procedures, without going through the legally established protocols (without ratification by the state legislature). Here’s a good summary of that from the Texas/Trump filing…

If the Supreme Court takes the case, and finds the states to be in violation of the constitution, it would give the state legislatures in these defendant states (all republican-majority) the confirmation of “irregularities” in the vote, and therefore, confirm their mandate to choose the electors to send to the Electoral College.

That would be a path for a Trump win.

If, after such a Supreme Court determination, neither candidate were to achieve the necessary 270 electoral votes, the vote would go to the House of Representatives, where each state would represent one vote. The U.S. State House delegation has a republican majority.

Disclosure: We may have heard something over the weekend, I am currently not fully caught up. Should details have emerged, they will be discussed tomorrow.

The market has been assigning virtually zero probability of disruption. The odds aren’t high, but I suspect greater than zero. That said, the clock is ticking, as the Electoral College appointees are due to vote on today.

Week 50 Sector Overview