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Could the presidential election disrupt the US economy’s winning streak?
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Could the presidential election disrupt the US economy’s winning streak?

Key recommendations

  • The US economy is running smoothly, but any delay in the outcome of the presidential election could destabilize it.
  • Polls show a close race, increasing the chances that the result will be in doubt,
  • One economist said there is “nothing but downside” to the economy if the election is close and contested.

The US economy has been running smoothly for the most part, but that could change depending on what happens at the polls on Tuesday, especially if the outcome is not immediately clear.

Short elections present a number of risks to the health of the economy, starting with the possibility of extended elections or disputed vote counts. Late polls have shown the presidential race to be a battle between Vice President Kamala Harris and former President Donald Trump in battleground states that will determine the winner. The closer the election turns out to be, the more likely the outcome will be in doubt, potentially disrupting the economy in the coming days.

“It could take days or even weeks to determine the winner. Social unrest under such circumstances would not be surprising,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a commentary. “This would be hard for the already fragile collective psyche to bear, undermining investor, business and consumer sentiment. There is only a downside for the economy if the election is close and controversial.”

Indeed, the Associated Press did not announce the result of the 2020 election until the Saturday after Election Day. The result could take even longer this time, especially if it comes down to Pennsylvania, where election officials aren’t allowed to start counting mail-in ballots until Election Day.

Further disruptions could occur if the results are legal challenges.

What’s at stake

Voters ranked the economy as one of their top considerations during this election.

By the numbers, the economy is in a healthy state, with low unemploymenta booming stock market and solid economic growth. At the same time, a dysfunctional and unaffordable housing market affected the economyand lower income households have he struggled to cope with the outbreak of post-pandemic inflation, despite overall wage increases. Although prices of most things have stopped rising rapidly, they have not fallen back to pre-pandemic levels and probably never will.

Regardless of who ultimately wins, a delay in deciding the election could disrupt financial markets and the wider economy. The two candidates they have very different economic policies and investors I generally hate uncertainty about future conditions. Uncertainty can cause market volatility and large fluctuations in the prices of financial assets.

“It’s rare for the economy to perform as exceptionally well as it has now. But for it to continue this way will require the presidential election and its outcome to play out in a reasonably graceful manner,” Zandi said. “This is probably a good time to catch you.”