The Big Debate - What Actually Matters?

There's a debate happening tonight.

You may have heard about it.

Every man, woman, child, dog, cat, and parrot has an opinion on what the debate will mean for the election outcome and/or equity markets.

And we are only just getting started.

It's going to be a long month (and a bit).

Let's take a more balanced perspective, starting with the debate itself.

First up, the format.  

The debate begins at 2AM BST.

Six questions in six segments, 15 minutes each.

No commercial breaks, just 90 minutes of uninterrupted action.

• Trump and Biden's records

• Supreme Court

• Coronavirus pandemic

• Race protests and violence in cities

• Election integrity

• Economy

Each will get two minutes apiece to respond to the question initially before the back-and-forth begins.

That's a pretty brutal schedule.

After tonight, we should know if Biden is as easily confused or angered as he appears on those viral videos (and as Trump alleges).

If there is any truth in the dementia rumours, it will be impossible to hide for a solid 90 minutes.

Trump has also suggested that Biden will get a "massive shot in the ass" before the debates, and should submit himself for a drug test.

If there were a wonder drug that could turn you into a master debater (no, you're immature) for 90 minutes, then they should nationalise it and ramp up production.

They could plug that fiscal deficit in no time.  

PED's aside, most pollsters believe that voters have already made their minds up.

However, we know from experience that what people say and what they eventually do are not necessarily the same thing...

In other words, the polls are frequently wrong and I wholeheartedly endorse this tweet;

But this is the world we live in, everyone has their 'hot take' to offer, and the polls are the only real guide there is.

Until NOW of course, when everyone can watch these debates and become armchair experts on U.S. politics and who will win the election.

Much like the polls, the debates are unlikely to shape the final outcome.

Stealing a headline from Politico;

...and that is precisely why this debate is so captivating.

Trump's framing (and those widely shared video clips) ensure plenty of eyes will be monitoring Biden's performance for any signs of confusion.  

Whatever happens, it will fill websites, social media, and flood the front pages of newspapers.

But perhaps the only thing that definitively matters is if one of them cocks things up on such a monumental scale, it seems unrecoverable.

Otherwise, the natural ebb and flow of a closely fought election will continue, with everyone predicting huge outcomes based on a singular event.

One example from GS;

Some bold predictions by the GS analyst/intern there.

Anyway, let's move onto...

The grey areas and narrowing the focus

Grey areas are what makes a market.

Risk markets hate uncertainty.

So, relative certainty is a good starting point

According to the polls, Biden leads, and the base case is a 'blue sweep' (democrats would regain control of the senate, keep control of the house, and Biden wins).

Therefore, it stands to reason that a strong (enough) performance from Biden would be risk positive.

The markets are relatively certain about this.

Alternatively, if Trump is perceived the victor (and it moves the polls), then the election result becomes less certain, and risk could reprice lower.

TL;DR  

For all the hysteria, that's probably the only question that matters.

Post-debate, the media coverage will subsequently guide the matrix of narratives for the next week or two.

Then, the strongest narratives will frame the next two debates.

Here's the schedule;

If you feel the urge to read up on the debates and what people are watching, then there's a decent mix of perspectives and background below.Take your pick.