Strategy Monthly. Election Night Scorecard. November 4, 2016

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1 Strategy Monthly Election Night Scorecard In keeping with previous presidential election cycles, we are pleased to present the 2016 edition of our election night scorecard. Many of you will intentionally find something (anything?) else to do Tuesday night rather than watch election results, but for those of you who are political wonks like us, we offer the following viewing guide to the election, leavened with equal dashes of history and levity. Friends and clients of Brown Brothers Harriman (BBH) will know that we are fundamental investors, driven by the desire to own companies that have a greater-than-average degree of control over their own destiny and that trade at an appropriate discount to their intrinsic value.1 We do not position portfolios in anticipation of any particular economic or political development. Instead, we believe that the best way to pursue returns while mitigating risk is through rigorous analysis at the issuer level, coupled with a disciplined approach to identifying value. Having said that, changes in the political landscape warrant attention, and our bottom-up process is certainly informed by top-down risks. Politics matter. What happens on Tuesday is not an election it is 51 separate elections, in which each state (plus the District of Columbia) votes to appoint electors to select the president and vice president. In all but two of those states (Maine and Nebraska), the winner of the popular vote gets all the College votes, which makes some states more important than others. The tables that follow are arranged chronologically by when the latest polls in each state close. Analysts are generally reluctant to call a state for one candidate or the other until voting is complete, although in some states with two time zones the outcome can become evident even before the later time zone closes. The chronology of this table provides some idea as to how election night is likely to unfold. s are categorized and colored by their likely voting patterns, with expected Republican states in red, Democratic states in blue and toss-ups in gray. The Senate is also in play. The Republicans and Democrats each control 46 seats that are either not up for re-election or are not competitive. That implies that the outcome of eight Senate races will determine control of the Senate. Those races are noted in the what to watch section of each hour. It should go without saying, but for the record, nothing herein should be interpreted as an endorsement of any candidate for any office, either by BBH or by your faithful correspondent. But we do promise regardless of the outcome that the sun will rise on Wednesday morning. Seven O Clock The 7:00 hour should prove kind to Donald Trump. There are 60 College votes up for grabs, of which Georgia (16), Indiana (11), Kentucky (8) and South Carolina (9) are solidly in the GOP camp. Vermont (3) and Virginia (13), the home state of vice presiden- 1 Intrinsic value: BBH s estimate of the present value of the cash that a business can generate and distribute to shareholders over its remaining life. BBH STRATEGY MONTHLY / Private Wealth Management 1

2 tial nominee Tim Kaine, should break Democratic. That implies a lead for Trump in the College race once this group of six states weighs in, but the evening is young! Watch the Senate race in Indiana. Evan Bayh (D) is consistently ahead in the polls to fill the seat vacated by the retirement of Dan Coats (R). A Bayh victory would be a gain of a Senate seat for the Democrats. Georgia 16 GOP Trump has held a consistent lead in the Georgia polls since the summer, and that lead has widened over the past few weeks. The last time Georgia voted for a Democrat was in 1992, when it voted for another candidate named Clinton. Although not a toss-up state, the margin of victory for Trump in Georgia might provide an indication as to how the rest of the evening will play out. Indiana 11 GOP Indiana voted for Obama in 2008, but with that exception is a reliably Republican state. This should be an easy win for Trump, who has led every poll with a comfortable margin. The Senate race in Indiana may determine the balance of the Senate. Evan Bayh (D) is consistently ahead to fill a seat vacated by the retirement of Dan Coats (R), which would be a gain of a Senate seat for the Democrats. Kentucky 8 GOP Kentucky is a very red state, to the point that there are very few polls. Trump should carry the state by a wide margin. South Carolina 9 GOP South Carolina hasn t voted Democrat since 1976 and should be an easy win for Trump. Vermont 3 DEM Vermont was consistently Republican until 1992, but has voted Democratic in every election since then. Virginia 13 Toss-Up Real Clear Politics has moved Virginia into the toss-up category on the basis of a few recent polls that show Hillary Clinton s lead narrowing to just 4%. That s larger than the margin of error, and the state should still be a safe DEM win. Tim Kaine, Clinton s running mate, is the junior senator from Virginia, and the state will likely cast its 13 College votes for the Democratic ticket. Virginia was a predictably Republican state until recently but voted for Obama in the past two elections. If, on the other hand, Virginia goes for Trump, the evening could get really interesting. Seven Thirty Three more states close their polls at 7:30, including the toss-up states of North Carolina (15) and Ohio (18). The outcome here may indicate how the rest of the evening plays out: Trump has surged in the North Carolina polls over the past week, but the most recent poll has Clinton regaining the lead. Trump has led Ohio polls since early October. It is hard, though not impossible, for Trump to get to 270 College votes without these two states. The North Carolina Senate race will also influence the balance in the Senate, as Richard Burr (R) fights to retain his seat. BBH STRATEGY MONTHLY / Private Wealth Management 2

3 North Carolina 15 Toss-Up North Carolina will likely influence the outcome of the presidency as well as the Senate. Clinton has consistently led in the polls, but within the margin of error, and her lead on Trump has waned over the past few weeks. Other than Carter in 1976 and Obama in 2008, North Carolina has voted for the GOP in the past 10 elections. Richard Burr (R), the incumbent Republican senator, is battling a close race with his Democratic opponent Deborah Ross (D). Ohio 18 Toss-Up Ohio is a perennial toss-up state, voting for the ultimate winner in each of the last 10 presidential elections. Ohio polls have bounced back and forth for months, with Trump ahead in the past few by a slim margin. The outcome of the Ohio vote, and the margin of victory for the winner, may provide a good indication of trends for the rest of the evening. West Virginia 5 GOP Trump is ahead by double digits in West Virginia polls, buoyed in no small part by the importance of the coal mining industry in this state. Eight O Clock Now the evening really begins! Seventeen states and 172 College votes are on offer, including the perennially important states of Florida (29) and Pennsylvania (20). If Clinton wins these two states, the evening is all but over. These 49 votes, when added to the 226 likely College votes from reliably Democratic states, would put her in the White House, even if Trump wins Ohio and North Carolina. Four competitive Senate races will close at 8:00 as well. Marco Rubio (R) should be able to hold his seat in Florida, and Republican incumbents Kelly Ayotte (R-New Hampshire) and Roy Blunt (R-Missouri) are ahead in the polls as well, albeit not comfortably. The Pennsylvania Senate race increasingly looks like another pickup for the Democrats, as the incumbent Pat Toomey (R) has lost ground to his Democratic challenger Katie McGinty (D). Alabama 9 GOP Alabama hasn t voted Democratic since it voted for fellow southerner Jimmy Carter in This should be an easy win for Trump. Connecticut 7 DEM Clinton leads the Connecticut polls by a comfortable margin. An easy win for the Democrats. Delaware 3 DEM Clinton is up by double digits in this reliably Democratic state. District of Columbia 3 DEM The District of Columbia hasn t voted for a Republican candidate for president since the passage of the 23rd Amendment in 1961 gave D.C. votes in the College for the first time. We re not sure its voting machines even have GOP levers on them. BBH STRATEGY MONTHLY / Private Wealth Management 3

4 Florida 29 Toss-Up Along with Ohio (at 7:30), the Sunshine is one of the big toss-ups of the evening. Florida has voted for the ultimate winner in nine of the last 10 elections, most famously in 2000 when the Supreme Court intervened to stop perpetual recounts and award the election to George W. Bush. Trump and Clinton have traded leads in the polls, most of which are within the margin of error. It s hard to find a scenario in which Trump wins the White House without winning Ohio or Florida. Florida also matters for the balance in the Senate, as Marco Rubio (R) fights to retain his seat. Rubio seems to be comfortably ahead in the polls against his Democratic challenger. Illinois 20 DEM Illinois has voted for the Democratic candidate for the past six elections and is almost certain to do so again. Clinton leads the polls by double digits. Maine 4 DEM Maine is one of just two states (along with Nebraska) that can split its College votes, although it never has. Three of Maine s four votes are likely to go Democratic, but polls in congressional district 2 are tight and might go to Trump. Maryland 10 DEM The narrowest Maryland poll has Clinton up by 29 points. An easy win for the blue team. Massachusetts 11 DEM Massachusetts has voted Democratic in the last seven elections, and 2016 will make it an eighth. Clinton is 30 points ahead of Trump in most polls. Mississippi 6 GOP Mississippi is as red as Massachusetts is blue. The state hasn t voted for a Democratic candidate since Carter, and Trump is ahead of Clinton by double digits. Missouri 10 GOP Trump is ahead of Clinton by double digits in Missouri as well, and more recent polls have that lead widening. The Senate race in Missouri is the opposite, as incumbent Roy Blunt (R) is in a dead heat with his opponent Jason Kander (D). The outcome will play a major role in the balance of the next Senate. New Hampshire 4 Toss-Up Clinton has consistently led in New Hampshire, but the polls have tightened over the past few weeks. The state voted for Bush in 2000 but has been reliably Democratic ever since. New Hampshire has a key Senate race as well, as Republican Kelly Ayotte tries to hold onto her seat against strong competition from Maggie Hassan (D). Ayotte has been ahead in most polls, but the past few weeks have tightened to within the margin of error. BBH STRATEGY MONTHLY / Private Wealth Management 4

5 New Jersey 14 DEM New Jersey hasn t voted for a GOP candidate for president since 1988, and Clinton leads the polls by double digits. Oklahoma 7 GOP Oklahoma last voted for a Democratic candidate for president in The state is about as red as they get. Pennsylvania 20 Toss-Up Pennsylvania voters will help determine both the presidency and the balance of the Senate. The state has voted for the Democratic candidate for the last six elections and seems to be headed for a seventh. Clinton has trailed Trump in just one poll over the past year, but the margins are thin. Sen. Pat Toomey (R) and his challenger Katie McGinty (D) were neck and neck in the polls until the past few weeks when McGinty s numbers surged. This increasingly looks like another gain of a Senate seat for the Democrats. Rhode Island 4 DEM Nothing to see here, move along. Clinton by a mile. Tennessee 11 GOP Trump has consistently led the Tennessee polls by double digits. Tennessee voted for Bill Clinton twice but isn t likely to extend the same courtesy to this year s candidate named Clinton. Eight Thirty Only one state ends voting at 8:30 Eastern time. Here s your chance to get a bite to eat, take a walk or check Facebook to see if friends and family are still on speaking terms Arkansas 6 GOP In spite of voting for the Democratic presidential candidate in the past seven elections (two of which featured former local boy Bill Clinton), the polls show Trump with a 20-point lead. Nine O Clock If Clinton has already won two of the four earlier big toss-ups (Ohio, Florida, North Carolina or Pennsylvania), the rest of the evening is just about margin of victory. Having said that, just because polls close doesn t mean counts are final. Remember Florida in 2000! Indeed, unless the earlier states go overwhelmingly for Clinton, Trump is likely ahead in the College vote count even after the 9:00 states report results, as some larger West Coast states are still voting. There is less drama in the 9:00 hour. Thirteen states will determine 153 College votes, but without the swing state drama of the previous hour. BBH STRATEGY MONTHLY / Private Wealth Management 5

6 Texas 38 GOP Clinton has given Trump a run for his money in the usually reliable GOP Texas, but Trump has led in every poll. The last Democrat to win Texas was Carter. Michigan 16 DEM Trump s numbers have risen in Michigan over the past few weeks, but not enough to make the race competitive. South Dakota 3 GOP Trump by double digits. New York 29 DEM In a presidential race that features two New Yorkers, the state will vote overwhelmingly for its former junior senator, currently resident in Chappaqua, but thinking about moving back into a previous residence. Louisiana 8 GOP Trump is comfortably ahead in every poll. An easy win for the red team. Minnesota 10 DEM Minnesota hasn t voted for a Republican presidential candidate since 1972 when it voted for Richard Nixon over George McGovern. Not likely to break that streak in Nebraska 5 GOP Nebraska is one of two states (along with Maine) that can split its College votes by congressional district. It never has, and isn t likely to do so this year either. Wisconsin 10 DEM Although Trump s numbers in Wisconsin have risen, Clinton has never trailed and remains comfortably ahead. The Senate race in Wisconsin has become interesting just in the past week. Russ Feingold (D) has led the incumbent Ron Johnson (R) in all but one poll, but this week s polls have narrowed to within a point. Arizona 11 Toss-Up Arizona has voted Republican in all but one (1996) of the last 10 elections. Trump leads in most of the polls, but the Clinton campaign has poured resources into the state in the home stretch of the campaign. A probable win for Trump, but a coup if Clinton can turn the state blue. Colorado 9 Toss-Up Colorado was a generally reliable Republican state for many years but voted for Obama in 2008 and Clinton led the state by double digits in August and September, but that lead has vanished. The last few polls have Clinton up by a point or two at best. Kansas 6 GOP Kansas hasn t voted for a Democratic presidential candidate since 1964, and the streak will continue. New Mexico 5 DEM New Mexico has voted Republican in five of the last 10 elections and Democrat in the other five. Polls show a healthy lead for Clinton. Libertarian candidate Gary Johnson is polling in double digits in New Mexico but lags the two major party candidates. BBH STRATEGY MONTHLY / Private Wealth Management 6

7 Wyoming 3 GOP Wyoming is a very red state, voting GOP in each of the last 10 elections. The state is reliably enough Republican that there are no polls. Ten O Clock Still with us? Not much to add to the College vote tally at the 10:00 hour but a few smaller toss-up states, as well as a Senate race in Nevada that might seal control for one or the other party. Iowa 6 Toss-Up Trump has led every Iowa poll since early August, although usually within the margin of error. This has been a pretty reliable Democratic state at the presidential level, with the exception of a vote for George Bush in It s a genuine toss-up in Montana 3 GOP Trump by double digits. Montana has voted for the GOP in nine of the last 10 presidential elections. Utah 6 GOP Utah hasn t voted for a Democratic candidate for president since Lyndon Johnson in 1964 but may be the most interesting state of the evening, at least for political nerds. Trump leads the polls by a comfortable margin, but Evan McMullin, who entered the presidential race in August as an independent conservative, has poured resources into the state and is within striking distance of Trump. If he wins the state, he would be the first third-party candidate since George Wallace in 1968 to earn College votes. Nevada 6 Toss-Up Nevada has voted for the winning presidential candidate in every election going back to The polls this year have been back and forth, with Trump holding a slight edge in the past few weeks. Harry Reid s (D) retirement opens up a Senate seat, with Republican Joe Heck (R) slightly ahead in the polls vs. his challenger Catherine Cortez Masto (D). If Heck wins, it would represent a gain of a Senate seat for the GOP. Eleven O Clock Unless Clinton has swept the earlier swing states, the race will likely not be decided until the 11:00 state results are announced, and there aren t likely to be any surprises at this hour. Six states close their voting at 11:00, awarding a total of 85 College votes. California is the big kahuna. Oregon 7 DEM A solid blue state since Clinton leads by high single digits. BBH STRATEGY MONTHLY / Private Wealth Management 7

8 Idaho 4 GOP A perfect GOP voting record for the past 10 elections, and Trump will make it an eleventh. North Dakota 3 GOP So red there are no polls. An easy win for Trump. California 55 DEM California was a reliably Republican state throughout the 1970s and 1980s, and, of course, produced the GOP hero Ronald Reagan. The state has voted DEM since 1992, and Clinton holds a commanding lead this year. Unless she s already compiled enough College votes earlier in the evening, Clinton will likely surpass 270 College votes once California s 55 go to her. Washington 12 DEM Like California, Washington was pretty reliably Republican in the 1970s and 1980s but flipped to DEM in 1988 and has never looked back. Clinton leads the polls by double digits. Hawaii 4 DEM Hawaii voted for Reagan in 1984, but with that one exception has voted for the Democratic presidential candidate in the last 10 elections. One O Clock There s no reason to be up this late unless some large state earlier in the evening is too close to call, or you re actually voting in Alaska. Our 49th state gets the last word. Alaska 3 GOP Seriously, why are you still awake? Conclusions Even after the litany of October surprises, the College math remains firmly in Clinton s favor. There are 19 states with 242 College votes that have voted for the Democratic candidate for president in each of the last six elections. If Clinton can maintain that blue wall of Democratic support, she only needs to pick up 28 more votes to reach the magic number of 270 and can do so with a combination of Florida (29), Pennsylvania (20), Ohio (18) and North Carolina (15). Trump has a steep wall to climb mathematically. The Senate is less certain. The GOP can lose a few seats but needs to win five of the eight competitive races in order to retain 51 seats and control. Even if the outcome of the presidential race is clear earlier in the evening, the balance of the Senate may not be resolved until the Nevada polls close at 10:00. When all is said and done, we might very well end up with a status quo result, in which a Democrat occupies the oval office and has to work with a Congress controlled by Republicans in both houses. And yet there are so many firsts in this election cycle (not all of which have been welcome), that in the words of that great American philosopher Yogi Berra, It ain t over till it s over. Enough analysis. Time to vote. G. Scott Clemons, CFA Chief Investment Strategist BBH STRATEGY MONTHLY / Private Wealth Management 8

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