The 2024 US elections – Part I: Setting the stage

Summary

The 2024 U.S. elections will be a defining feature of the year as households, businesses and investors weigh the election's economic implications. So far, the presidential nomination process for the two parties has been relatively uneventful. A 2024 election rematch of Joe Biden and Donald Trump seems highly probable. If this occurs, it would become just the third instance in U.S. history of a race between two or more individuals who had been president previously.

With roughly nine months to go until Election Day, much can change between now and then. That said, if the 2020 election is indicative of the 2024 rematch, the race should be fairly competitive. Biden carried the day in 2020, winning the Electoral College 306-232 and the popular vote 51.3%-46.9%. But, several key swing states were decided by very tight margins.

We will be keeping an eye on head-to-head polls, approval ratings, prediction markets, forecasts of top political analysts and, of course, economic conditions to monitor the race. President Biden's net approval rating is currently a bit weaker than Donald Trump's was at this point in his first term. At present, prediction markets appear to give the edge in the race to Donald Trump, albeit not overwhelmingly so as neither candidate's odds are above 50%. Political forecasters, such as Larry Sabato and team at the University of Virginia's Center for Politics, also do not seem to see a clear-cut favorite at this point in time.

The race for the White House may gain the most attention, but control of Congress will also play a critical role in shaping the economic policy outlook. In recent years, unified party control of the House of Representatives, Senate and White House has produced much of the major legislation that has driven shifts in the economic outlook.

At present, Republicans hold a slim majority of 219-213 in the House of Representatives, with three seats currently vacant. All 435 seats in the House are up for election every two years, and it takes 218 seats to hold the majority.

Big swings in the makeup of the House tend to occur in midterm elections rather than in presidential elections. Majority control of the House has not switched parties in a presidential election year since 1952. At the moment, Republicans have a small edge in the generic ballot polling. That said, given that Republicans have such a small majority, Democrats need to pick up just a handful seats on net to retake the House, so a change in majority control would not surprise us.

The outlook for control of the Senate is more unique compared to the House. The Senate is currently split between 49 Republicans, 48 Democrats and 3 Independents who caucus with the Democrats, thus giving the Democrats a small majority.

Political analysts generally view this year's Senate map as more favorable to Republicans. There are 34 Senate seats up for grabs: 23 are held by Democrats (including the three independents) and 11 are held by Republicans. As a result, Democrats are playing “defense” in more states than Republicans.

Furthermore, Democrats are defending three seats in states that Donald Trump won in 2020 (West Virginia, Montana and Ohio) as well as several more in states that were competitive at the presidential level in 2020. These factors afford Republicans more opportunities to capture the much-coveted 51st seat, although there remains a long road ahead to Election Day.

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