The Week Ahead – Democracy and Elections

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

Democracy. Its origins from the Greek word dēmokratía, literally "rule by people". We can look back to the Greek city-states such as Athens as the forefathers for establishing the roots for the political system we use today. Our own Founding Father’s originally wanted to  follow the Roman Republic model, whereby only land owning gentry (men) were entitled to a place in Congress. This was a clear separation of patrician and plebeian classes. Instead, they went the route with the famous words from the Declaration of Independence, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”.  Voting rights has continued to evolve and progress. In 1789 states had the power to choose who could vote and typically that meant a property-owning white male (6% of the population). The Fifteenth Amendment in 1870 prevented states from denying states from denying a citizen the right to vote based on that citizen’s “race, color, or previous condition of servitude”.  In 1920 we saw the passing of the Nineteenth Amendment which allowed women to vote. In 1943 Chinese immigrants were given the right to citizenship and the right to vote by the Magnuson Act. In 1986 United States military personnel serving overseas and citizens living overseas were granted the right to vote in elections. Democracy has continued to grow globally, in 1974 the world only had 30 democratic countries. Today there are 117.  

In the week ahead all eyes will be on the midterm elections as the results will have significant ramifications on how successful the current presidential administration will be on pushing their agenda going forward. Looking at an aggregate of polls from fivethirtyeight.com suggests that the Democrats have an 85% chance of capturing the House of Representatives and the Republicans have an 86% chance of holding the Senate. That said, memories of the 2016 Presidential elections and Brexit remind of us that surprises are always possible. With the unemployment rate maintaining at 3.7%, wage growth now at 3.1% on an annual basis, and third quarter GDP at 3.5%, the Fed will likely use next week’s FOMC statement to strongly posture for the rate hike at December’s meeting. The market is currently pricing in a 7% chance of a rate hike occurring at next week’s meeting as this is the final meeting with no scheduled press conference. Lastly, don’t forget to do your duty as a citizen and vote!

“Nobody will ever deprive the American people of the right to vote except the American people themselves and the only way they could this is by not voting.”
–   Franklin D. Roosevelt

Data deck for November 3 – November 9: