The 2024 US election is more than just a political event; it’s a pivotal moment that could shape global markets for years to come. While the direct impact of US politics on Australian financial markets and superannuation funds might seem distant, the now interconnected nature of the global economy in 2024 means that Australian investors, should be attentive to the developments and the eventual outcome.

In the lead up to election day, we will be bringing you a three-part series, to ensure you are well prepared for the main event. In part one, we delve into how the US Electoral College functions and why the key battleground ‘swing’ state of Pennsylvania stands out as the most crucial player that will tip the balance and put one of the candidates, Kamala Harris or Donald Trump into the White House.

Electoral College

The only reason the concept of a swing state exists at all is because of the unique way the U.S. conducts presidential elections: with the Electoral College. The Electoral College was established by the U.S. Constitution as a compromise between electing the President by popular vote and by Congress. The system allocates a total of 538 electoral votes across the states, with each state’s allotment based on its representation in Congress—two Senators plus the number of Representatives in the House. Like a jigsaw puzzle, to win the presidency, a candidate must secure a majority of these votes, or at least 270.

The Electoral College introduces a winner-take-all mechanism in most states (except for Maine and Nebraska which distributes their electoral votes via individual congressional districts), the candidate with the most votes in a state, wins ALL its electoral votes. As we’ve seen in recent elections, this can significantly amplify the impact of swing states, where the margin of victory is often narrow and thus crucial to the overall outcome.

Historical Context

Pennsylvania has long been a bellwether in presidential elections, reflecting the broader political trends and often playing a decisive role. The state also played a decisive role in determining the victor in the American Civil War. The Battle of Gettysburg (Pennsylvania) was won by the Union and is widely considered the Civil War’s turning point, ending the Confederacy’s aspirations to establish an independent nation.

Historically, Pennsylvania has voted for the overall victor in 48 of 59 elections (81.4% of the time) and is tied with Michigan and Wisconsin for the longest active streak of voting for the winning candidate. Its role in the “Blue Wall”—a term used to describe the reliable Democratic strongholds in the North—has been significant, especially in the recent elections. Its 19 electoral votes make it one of the largest prizes in the Electoral College, and its diverse demographic makeup makes it a microcosm of the broader American electorate.

Political Landscape

The state is home to a blend of large urban and suburban centres such as Philadelphia and Pittsburgh, and vast rural areas. This combination creates a complex and often unpredictable electoral environment.

Over the last few election cycles, we have seen a shift from working-class voters away from the Democratic party, towards the Republicans. This is a by-product of disenfranchisement and the Union’s social role slowly eroding, with workers filling the void with other, often more conservative groups. This migration of thought is nowhere more prevalent than the state of Pennsylvania.

Pennsylvania’s large urban centres tend to lean Democratic, driven by younger, more diverse populations with higher college education levels. Conversely, the rural, blue-collar areas are usually more conservative, reflecting traditional values and economic concerns related to immigration and industries like coal and manufacturing. This divide has made Pennsylvania a battleground where both parties must pool their respective resources together to drive home their messages, while appealing to swing voters in the suburbs and smaller towns. Economic issues this cycle, such as cost of living pressures and job creation will be critical issues at the ballot box. The state’s economy has been impacted by rising costs, which will heavily influence voter preferences, turnout and specifically those who are working paycheque to paycheque.

Result Delays

Pennsylvania is also among seven states, including the fellow battleground state of Wisconsin, where pre-canvassing is prohibited under state law and will not begin until 7am on election day.  By contrast, states like Florida, with nearly double the population size of Pennsylvania’s approximately 13 million residents, report their preliminary election results on election night. It’s interesting to note,  Pennsylvanian election officials are now telling voters ahead of time not to expect the results of the high-stakes presidential race to be ready by election night – it could take a day or two until we know the result.

The ‘Key’

As voters prepare to head to the polls, the eyes of the nation and more broadly global financial markets will undoubtedly be fixed on Pennsylvania – waiting to see which candidate will emerge victorious in this key battleground state and who takes home the keys to the White House.

Given current state polling margins and likely results, if Harris wins Pennsylvania, she will achieve exactly 270 electoral votes (including Nebraska’s second district) – assuming she wins Michigan and Wisconsin (of course). As you can see, Pennsylvania is the KEY to the White House.

If this result plays out, Trump would be the loser with 268 electoral votes. We all know a razor thin electoral loss for Trump can mean only one thing… he and his supporters will not go quietly into the night.