Could the Presidential Election Disrupt the US Economy's Winning Streak?

The U.S. economy has been running smoothly for the most part, but that could change depending on what happens at the polls Tuesday, especially if the outcome isn’t immediately clear.

The close-run election poses a number of risks to the health of the economy, starting with the possibility of a prolonged election or disputed vote count. Late polls showed the presidential race is a tossup between Vice President Kamala Harris and former president Donald Trump in the battleground states that will determine the winner. The closer the election turns out to be, the higher the chances of the outcome being thrown into doubt, potentially disrupting the economy in the days ahead.

“It could take days or even weeks to determine the winner. Social unrest under such circumstances would not be surprising,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a commentary. “This would be difficult for the already fragile collective psyche to bear, undermining investor, business and consumer sentiment. There is nothing but downside for the economy if the election is close and contentious.”

Indeed, the Associated Press did not call the outcome of the 2020 election until the Saturday following Election Day. The outcome could take even longer this time, especially if it comes down to Pennsylvania, where election officials are not allowed to begin counting mail-in ballots until Election Day.

Further disruptions could ensue if there are legal challenges to the results.

What’s At Stake

Voters have ranked the economy as one of their top considerations during this election.

By the numbers, the economy is in a healthy state, with low unemployment, a booming stock market, and solid economic growth. At the same time, a dysfunctional and unaffordable housing market has plagued the economy, and lower-income households have struggled to cope with the burst of post-pandemic inflation despite overall increases in wages. While prices of most things have stopped increasing rapidly, they haven’t gone back down to pre-pandemic levels and likely never will.

Regardless of who ultimately wins, a delay in deciding the election could disrupt financial markets and the broader economy. The two candidates have very different economic policies, and investors generally hate uncertainty about future conditions. Uncertainty can cause market volatility and big swings in the prices of financial assets.

“It is rare for the economy to perform as exceptionally as it is right now. But for it to continue in this way will require the presidential election and its outcome to play out in a reasonably graceful way,” Zandi said. “This is probably a good time to buckle in.”