Undecided Voters To Determine Super Tuesday Outcomes

• Latest polls indicate a two-man race with Sanders to win many states and Biden coming in second. How these delegates are apportioned will come down to “Other/Undecided” voters, with several states currently recording high shares of undecideds.

• But, we caution, take nothing for granted. Voter sentiment is unstable and views change circumstantially.

Nothing is baked in the cake here. We’d all do well to remember that as we review the cacophony of polls and contemplate how Super Tuesday will play out for the Democratic candidates. Indeed, if we have learned anything over the past decade, past four years, and indeed the shocking market collapse of the past week, Anything Can Happen. Some obvious examples of highly unlikely events that happened:

• The collapse of Lehman Brothers in September 2008 and the ensuing economic Armageddon;

• The near default of the US in August 2011 when Congress faced yet another debt ceiling deadline and triggered a rating downgrade by S&P (from AAA to AA+);

• The election of Donald Trump in 2016.

Voter Sentiment is Anything But Stable

With those sobering reminders, let’s review how betting markets have handicapped the likelihood of several Democratic candidates winning the nomination over the past six months:

Chart 1: Polls Have Shifted Dramatically Since October

Source: Election Betting Odds

Back in October, Elizabeth Warren appeared all but unbeatable with a 51% chance of winning. Bernie Sanders was about 4%, in a tight cluster with people like Kamala Harris, Beto O’Rourke, Andrew Yang, and Pete Buttigieg.

Now, Warren is given a 0.8% chance of winning the nomination. Even Hillary Clinton scores higher, at 1.8%. And Sanders is where Warren was in October. Essentially her base jumped ship, maybe because she backed down on Medicare for All?

Meanwhile, President Trump’s probability of winning re-election were climbing steadily since a low point in early January 2019 when recession fears and a 12% drop in the stock market caused his chances to fall to about 30%. It recovered to about 40% in November 2019 and hit a high of 59.8% in early February thanks to the strong stock market and growing scepticism about the Democratic presidential hopefuls. His numbers have wobbled since as the coronavirus crisis and market selloff hit the headlines, but he’s still at 56.9%.

Even the South Carolina primary results illustrate how flaky polls are as a source of insights about voter intentions. A few days before voting took place, a Monmouth University poll showed Joe Biden in the lead with 36% of planned votes and Bernie Sanders in second place with 16%. After the dust settled Biden won with 48.9% and Sanders got 19.9%.

Chart 2: Polls Got it Right. Kind of

Source: Monmouth University Polling Institute

Where the poll missed was that raft of “Other” candidates, most of whom had already suspended their campaigns. It is apparent that most of those votes went to Biden. Sanders fared better than expected, mostly at Strayer’s expense.

The point here is that at least up to this point polls and betting markets have been little more than in-the-moment sentiment indicators. It is readily apparent people have been changing their views with the circumstances. As far as this presidency race goes, there is still plenty of time for anything to happen.

What to Look For on Super Tuesday

For what they are worth, polls and sentiment indicators seem to suggest Sanders should win many states with Biden coming in second. Elizabeth Warren is a wild card, projected to finish in single digits in many states but doing better in California, Colorado, and Massachusetts.

Chart 3: Undecideds Will Decide Super Tuesday Outcomes

Source: Real Clear Politics

Two points stand out in a sample of recent polls from seven Super Tuesday states.

1. Only Sanders and Biden are consistently above the 15% threshold required to win delegates. Bloomberg and Warren should be able to win some delegates in some states, but for all practical purposes Super Tuesday appears to be a two-man race.
2. How those delegates are apportioned will come down to “Other/Undecided” voters. Polls suggest these voters exceed 15% in Colorado, Massachusetts, Texas, and Virginia, and other states probably also have high numbers of undecideds. Pete Buttigieg has been polling in the 7-10% range in many states; his decision to drop out could well cause the pool of “other/undecided” to nearly double.

This is no place for trying to call how those votes will be cast. We can say that if Sanders gets many of them, he will win more than 50% of delegates in many states and be in a good position to win the Democratic nomination outright. If they end up going to Biden or some mix of candidates, the likelihood of a brokered convention increases.

These possible outcomes seem fairly cut and dry. But remembering that Anything Can Happen, we must acknowledge much going on below the surface. If Sanders gains the upper hand, for example because the moderate vote splits between several people, there is the possibility that the Democratic establishment tries to override clear voter preferences – with unpredictable results. And if it comes down to a brokered convention, all bets about the outcome are off, especially if Sanders has the most delegates.

For all these possibilities, it remains Trump’s election to lose. But, as the coronavirus crisis is making clear, a lot may depend on the hand he is dealt, and how he plays it.

Over a 30-year career as a sell side analyst, John covered the structured finance and credit markets before serving as a corporate market strategist. In recent years, he has moved into a global strategist role.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)