On October 27, the Greater Baltimore Committee (GBC) held its 2020 Economic Outlook Conference – From Pandemic Economy to Presidential Election: Effects, Forecast & Future with panelists Maryland Comptroller Peter Franchot; Amanda E. Agati, Senior Vice President / Managing Director and Chief Investment Strategist of PNC Financial Services Group; and Bernard Yaros, Assistant Director and Economist of Moody’s Analytics. GBC President and CEO Donald C. Fry served as the moderator.
The speakers discussed the current economic status and trends of the state and national economy, the impact of the coronavirus pandemic on the economy and how the pandemic has affected the 2020 Presidential Election.
Comptroller Franchot began with an apology, “We have obviously failed to protect all of you — our residents and our citizens — from a devastating virus and we have created economic damage, as a result, of almost unimaginable proportions. My heart goes out to the families in Maryland who have lost almost 4,000 of their loved ones,” he said.
Franchot noted that, “As we speak, tens of thousands of small businesses in Maryland have gone out of business or they’re hanging on by a thread — or their fingernails, I guess you could say. …I think we’re going to have a chance to reinvent and reimagine Maryland where Maryland will actually be a better and stronger state. …It’s going to be a tough winter. Make no mistake.”
Then he outlined three main uncertainties for economic recovery:
- The election
- A second stimulus package
- A distributed vaccine
On the topic of the upcoming election, Franchot said, “I believe we’re going to have a Democratic landslide. The Democrats are going to take the White House, the Senate and a strengthened majority in the House. I happen to think Americans are accustomed to holding their leaders accountable. The debacle we’re experiencing is a significant calamity.”
Franchot stressed the need to support Maryland’s small businesses, urged attendees to shop local and emphasized the importance of a stimulus package, saying that it is important to spend money during an economic collapse. “We’re going to have to do it in order to save ourselves,” he said. “There will be another stimulus, in my mind, because otherwise we’re going to see a collapse of the real economy.”
As for a vaccine, Franchot said he believes there’s one coming, but that it probably won’t be distributed or widely available until the end of next year. “There is a brighter day at the end of next year, but we all have to survive together.”
Franchot suggested the way forward for Maryland is to put it on the map with young people around the country. He said the state needs “fresh talent, new energy. I want them to come to Maryland because some amazing things will be happening. …We can put Maryland on the map in a positive way, best foot forward, but we need to survive the next 18 months.”
Focusing on some key highlights from her perspective as an investment strategist, Agati noted what an unprecedented year this has been.
“We actually shut down the global economy in response to a pandemic,” she said. “It’s really easy to flip the switch off on the global economy, much tougher to flip that switch back on.”
She indicated three data areas in gauging the health of the consumer — retail sales, public transit and restaurant bookings — as performing far from pre-COVID rates.
Agati said that Main Street is not out of the woods yet, but “the key to a path forward is the health and psyche of consumers” and she agreed with Franchot that we “absolutely need additional fiscal stimulus to bridge the gap in the short run.”
One area where Agati sees potential growth is with the stay-at-home trade (everything that you need when you’re hunkered down), meaning technology, communication services and staples will be “key market leaders and will continue to be past the election.”
On the topic of the election, Agati noted that polling is notoriously unreliable as a key predictor of results. However, she said that taking the data at face value would suggest a “pretty clear vote of confidence that there will be a change in control with the election results.”
The key question as far as election results go, Agati said, is: “Will voters actually hold Trump responsible for all the economic damage?”
She also noted, historically, if the market is up, the party in power tends to stay in power and said that the wild card this year will be voter turnout.
As for COVID-19, Agati said it is the single most critical determinate of the path moving forward. “At the end of the day, COVID really does have important implications for the trajectory of the market, the trajectory of earnings growth, the trajectory of GDP growth, market leadership, monetary policy.”
Agati reiterated that the wild card for the election will be voter turnout, but the wild card for all other issues combined will be COVID. “The virus literally trumps it all when it comes to the markets.”
Yaros’ presentation focused on the big question: Will COVID-19 upend the 2020 Election?
He provided models concerning who will be the next president and which state will determine the president, as well as some wild cards to watch for in the election.
While Yaros said it is very tough to predict voter turnout, his models suggested that if nonincumbent (Democrat-leaning voters) turnout is typical, Joe Biden will win a nail-biter; if nonincumbent turnout is high, there could be a Biden blowout.
He said Biden’s main path to victory would be to take Michigan, Wisconsin and Pennsylvania.
If nonincumbent turnout is low, Donald Trump could win the election, said Yaros. “He still has a very strong base. Democrats cannot rest easy. Democrats really have to work hard for this win because Trump still has a pathway to victory.”
He agreed with Agati that it is historically very difficult to dislodge an incumbent president.
“It’s really the unemployment rate that is the best economic predictor for election results,” said Yaros, because it raises the discontent with the political status quo. “This one predictor is costing Trump the election, according to our models,” Yaros added.
The one state that will determine the election, according to Yaros? Pennsylvania. “If Biden is to take back the state, he needs to improve upon [Hillary] Clinton’s performance in Pittsburgh,” he said. “Then, it’s just a matter of turning out the base in Philadelphia and its surrounding counties.”
If Pennsylvania is the decider, “buckle in,” Yaros said. “Election Night will be Election Month.”
As for those wildcards that could determine election results?
- Early voting — “The numbers are absolutely eye-popping, Democrats have taken the lead.”
- COVID-19 — “There is a relationship between infections and the economy. More infections means a weaker labor market and weaker economy. [Infections] could lead to disruptions for in-person voting.”
- Voter turnout — “By all indications, we could very well see record turnout. Enthusiasm for one’s candidate will be a powerful motivator for turnout.”
Not knowing the Election Night results quickly could impact the economy.
“If we know the results by Thanksgiving — which seems likely — stocks and the economy should be fine. Any longer could create a crisis of confidence,” said Yaros.
Agati added, “Markets hate uncertainty. Any concern of getting an outcome has the potential to rattle the market,” which would present some significant volatility. “Uncertainty around an election is not going to be good news for the economy.”
As for his Election Night prediction, Yaros said everyone should be watching Florida and North Carolina. “If Biden has a decisive lead on Election Night in Florida or North Carolina, that would be an indication that Biden would win.”
He also said Arizona is worth keeping an eye on and said that if Biden has a decisive lead there “it will give some indication that Biden will win. That would give some sort of certainty to the market.”
The speakers seemed to agree that there is some hope in the future but we just need to focus on survival for now.
“Get through this. We’re not sure what’s going to happen, but some really bad things could happen,” said Franchot. “It is just going to be a long, hard, cold winter.”
In closing, Fry reminded attendees to vote. “A week from today is Election Day. Many have suggested it is the most important Election Day in generations. If you’ve not voted, please make sure that you exercise that most important right that you have to ensure a strong democracy.”
- Moody’s Analytics: COVID-19 Upends the 2020 Presidential Election
- Baltimore Sun: Uncertainty from coronavirus, presidential election could dampen Maryland economy for months
- Technical.ly: Economists are tracking these indicators to understand the recession and the election
- News Coverage of GBC COVID-19 Events