Source: China Securities Co.,Ltd. Research
Authors: Qian Wei, Zhang Yican

This week, most states in the USA have opened early voting channels, allowing American voters to vote early either in person or by mail.

Based on the latest early voting results, Trump's prospects in some states are average, leading to market hedging and weakening the strong expectations of the 'Trump trade'.

(1) Historically, does early voting in each state have a predictive significance?

Early voting has become an important form of the current USA election. Influenced by the new crown epidemic, the 2020 election set a record for the total number of early votes, exceeding 0.101 billion ballots, accounting for 63% of all final votes. Apart from 2020, although the total number of early votes has increased each time, the proportion of early votes has remained relatively stable since 2012, with early voting accounting for about 36% of all votes in 2012 and 2016. From this year's data, as of October 31, a total of 63.75 million people in the USA have applied for mail-in ballots or early voting, and the total number of votes is expected to fall short of the level in the same period of 2020, which also means that the forward-looking of this year's early voting results is lower compared to 2020.

Looking at the ratio of mail-in ballots to in-person voting, apart from the impact of the 2020 epidemic where the ratio of mail-in ballots reached two-thirds of the total number of early votes, the rest of the time the ratio of mail-in ballots and in-person early voting is basically similar. This year, the proportion of in-person early voting has reached 54%.

Democratic supporters tend to early voting, while Republican voters tend to vote on election day. The Democratic Party has been committed to expanding voter eligibility, simplifying voting procedures, and supporting the agenda of early voting. In particular, women, black people, Latin Americans, and indigenous voters have often experienced suppression of voting intentions in the past voting process, so the Democratic Party, in order to maximize the vote rate, actively conducts civil rights movements and judicial procedures related to voting in various states. The Republican supporter group is mainly composed of middle-aged and elderly white Americans, who tend to vote in person on either early voting or election day, and based on the 2020 data, close to 60% of Democratic supporters and 32% of Republican supporters voted by mail-in ballot. This year, the Republicans are actively calling on voters to early vote to counterbalance Democrats in the early voting process.

Overall, the pattern of early voting is influenced by voter preferences, party preferences, and other factors, demonstrating the inherent characteristics of an increase in the number of early voting voters and the Democratic Party's dominance in this segment. However, it is still too early to infer the final election results.

Is the current early voting results really unfavorable to Trump?

The current market is more concerned about Harris leading in early voting in several swing states, especially in Pennsylvania. According to the latest early voting statistics, Harris is leading in the early voting in Pennsylvania, Michigan, Wisconsin, and Georgia, especially in Pennsylvania leading Trump by 56% to 33%. However, the current lead does not guarantee victory in that state. In the 2020 general election early voting process, Biden was leading Trump by 65% to 24% in Pennsylvania, but the final election result was only 1.2% ahead of Trump, and this year Harris's lead in Pennsylvania has even decreased from 41% to 23%. Although there is Republican pressure, this phenomenon also exists in North Carolina, Nevada, and Arizona. Based on the current tense situation between the Democratic and Republican parties, the final vote results of the two candidates may not differ significantly. Therefore, predicting the final outcome of the general election from the current early voting is not accurate, and we need to observe the vote counting situation next week to determine the final outcome.

What marginal changes have occurred in this year's early voting results compared to previous years?

Although early voting is not enough to determine the final election outcome, marginal changes can still provide a lot of important information. Looking at the early voting results in Pennsylvania this time, there are several issues worth paying attention to:

First, Harris's efforts to attract female voters seem to be effective. Currently, the Democratic Party is leading in mobilizing female voters in Pennsylvania. Topics such as women's rights and abortion rights, which Harris emphasizes, are more attractive to female voters. In early voting in Pennsylvania, women voters accounted for 56% of the total, with more Democratic voters among newly registered voters than Republican voters, and more female voters than male voters. Considering the overall low participation of female voters, this improvement in the data may indicate that Harris has won over some previously silent female voters.

Second, the phenomenon of voters over 65 years old switching to the Democratic Party is beginning to emerge. According to the latest poll results from ABC News, Harris leads Trump by 5 percentage points among voters over 65 years old. In Pennsylvania and Michigan, Harris has a slight advantage among voters over 65 years old compared to Trump. The early voting results in Pennsylvania this year partly confirm the possibility mentioned above. The enthusiasm of voters over 65 years old for early voting in Pennsylvania is higher than before, increasing from 36% in 2020 to 46% this year. Unexpectedly, the Democratic Party gained a leading advantage, while this group was previously one of the Republican Party's strongholds.

Therefore, while overall data may not provide more guidance, some structural and high-level indicators can indeed give Democrats some encouragement.

Risk warning

U.S. inflation rising higher than expected, U.S. economic growth exceeding expectations, leading to the continued tightening of the Federal Reserve's monetary policy, a sharp appreciation of the U.S. dollar, an increase in U.S. bond yields, continued decline in U.S. stocks, a banking crisis leading to bankruptcies, and emerging markets facing currency and debt crises. The U.S. economic recession exceeding expectations has led to a liquidity crisis in financial markets, forcing the Fed to shift to a looser policy. The European energy crisis surpassing expectations has plunged the Eurozone economy into deep recession, causing global markets to become turbulent, shrinking external demand, and policymakers facing dilemmas. Global geopolitical risks intensifying, U.S.-China relations deteriorating beyond expectations, uncontrollable factors affecting commodities and transportation, a deeper move towards deglobalization, continued disruptions in the supply chain, and worsening resource competition.

Editor/rice