US Elections: Trump's positions have alienated many Hispanics - BBH

Research Team at BBH, suggests that the US election has moved within the three-month time frame that is important for numerous market participants.  

Key Quotes

“The dramatic departure from American tradition and the status quo that Trump's candidacy represents brings a new level of attention to the contest. Like many, we are surprised that Trump secured the Republican nomination in the first place. While his unorthodoxy may have yielded some advantages in the primaries facing many rivals, his vulnerabilities have been highlighted over the past few weeks.

In the electoral cycle, the situation tends be fluid until around Labor Day, or early September in the US.  However, there has been a deterioration of Trump's support that the national polls only partly reflect.  The key is the Electoral College, and a handful of swing states.

When political analysts look at the Electoral College map, Pennsylvania is emerging as a critical state for Trump and, demographically, it is his sweet spot.  The state is 20% whiter than the country as a whole, and is exposed to manufacturing with a large working class base.    Romney lost the state by five percentage points.  It is a truism, that for Trump to win he must do better than Romney.  Trump is trailing by more than 10 percentage points in a recent poll of likely voters.

Trump's positions have alienated many Hispanics.  This threatens his performance in other swing states, such as Florida and Nevada.  Michigan is also an important Electoral College state that Trump needs to win but is slipping further behind Clinton.  The gap is now near 10 percentage points.  In New Hampshire, home to Trump's significant victory in the primaries, he is trailing Clinton by 15 percentage points.  

Nationally, Trump continues to do a few percentage points better than Romney did among non-college educated, especially white men.  However, he is trailing Romney by more than twice as much among college-educated whites.  Ethnic voters account for a larger share of the electorate than they did in 2012, and Clinton is polling better than Obama.  Trump lags Clinton by almost 70 percentage points among these voters.  Earlier, the polls that included third party candidates tightened the contest, meaning they took votes from Clinton.  This seems to be less the case in more recent polls.

The takeaway is that with the election in three months, it is becoming more difficult to see how Trump will be able to secure the 270 Electoral College votes he needs to become the next president.  Although humbled by difficulty in anticipating political (let alone economic) developments, it might make sense for investors not to completely discount the possibility of a Trump victory, but spend more energy on contemplating the policy implications if the Democratic Party can secure the legislative branch, as well.  The Senate is possible, if not likely, while the House of Representatives is regarded as more difficult for the Democratic Party, but not impossible.  

The legislative agenda of a Democrat in the White House and a Democrat-dominated Congress would be different than what Obama has experienced, for example.  There would be budgets and appointment confirmations.  The Federal Reserve's Board of Governors would be fully staffed.  Some form of Glass-Steagall could get resurrected, though it is ironic to note that it was in Bill Clinton's Administration that Glass-Steagall, which had already been largely gutted, was put out of its misery.  It would have implications for trade policy.  The Federal minimum wage would likely rise.”