Former Vice President Joe Biden made a surprise comeback during the Super Tuesday contests, paving the way for a two-person race to the Democratic nomination. While the first four primaries may help candidates garner momentum, Super Tuesday determines the true viability of a candidate, with roughly one-third (1357) of the total delegates awarded in a single day across fourteen states and two territories.
Biden won Alabama, Arkansas, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee, Texas, Virginia and likely Maine, while Senator Bernie Sanders took Colorado, Utah and Vermont, and is projected to win California. This brings Biden’s total projected delegates to 670 (45%) and Sanders’ to 589 (39%) at the time of publication. Biden’s success is a result of two factors: momentum from a strong South Carolina win, and consolidation of the moderate vote after former Mayor Pete Buttigieg and Senator Amy Klobuchar dropped out of the race and endorsed Biden.
Given the 15% threshold to win delegates, Senator Elizabeth Warren and former New York City Mayor Michael Bloomberg both picked up some delegates, but not enough to remain viable candidates. On Wednesday morning, Bloomberg dropped out of the race. However, Bloomberg has committed to spending hundreds of millions of dollars to support whoever the Democratic candidate is, which could be a boon for Biden. Sanders has publically refused to take funding from Bloomberg.
Looking ahead, 935 delegates are at stake over the next two weeks, with key races in Michigan and Florida. Biden could continue to consolidate the lead in the Midwest and the South, while Sanders could maintain a foothold in the West. Still, despite Biden’s Super Tuesday surge, there are still many races to go and we could still be headed towards a contested nomination at the Democratic National Convention in July.
Recent head-to-head comparisons show Biden’s odds of winning the nomination have shot up, while Sanders’ have fallen, but the race against Trump for each looks tight. Although history shows the incumbent president has an advantage, the chances are reduced if there is an economic downturn. Given the uncertainty that surrounds the spread of COVID-19 and its economic impacts globally, how this plays out for the rest of the year will be consequential to President Trump’s chances of re-election.
On Wednesday, stocks opened 1.4% higher, as the prospect of a moderate Democratic candidate rose. From a policy perspective, a moderate Democratic president would likely not aggressively pursue issues like reversing the corporate tax cut or implementing a public-only option for health care, which might mean a milder reaction from markets. However, while this reduces the tail-risk of a more left-leaning presidential candidate, it does increase the likelihood of a Democratic president, with potentially mixed implications for markets. Either way, it is too early to tell who the Democratic nominee will be or precisely what their chances are against President Trump, so investors would be wise to stick to their investment plans and continue to monitor the economic fundamentals instead as the race unfolds.