Implications of Justice Ginsburg’s Death on a Contested Election

While a justice nomination is always a critically important process, it is even more pivotal in 2020, as the Supreme Court could play a role in determining the outcome of a disputed election.

The passing of Supreme Court Justice Ruth Bader Ginsburg has created an opportunity for President Trump and the Republican Senate to name her replacement. The decision, which would be Trump’s third Supreme Court justice appointment during his first term in office, could change the Supreme Court’s balance of power further to the right. Justice Ginsburg, who was appointed to the Supreme Court by President Clinton in 1993, was among the Court’s most liberal members.

Expectations are that President Trump will make a nomination quickly, with additional urgency required in the confirmation process given the presidential election will be held in less than 45 days on November 3.

While a justice nomination is always a critically important process, it is even more pivotal in 2020, as the Supreme Court could play a role in determining the outcome of a disputed election. Let’s take a look at the Supreme Court nomination process, key election dates to watch and market implications.

The Path to Naming the Next Supreme Court Justice

In 2016, when President Obama nominated Merrick Garland to replace Justice Antonin Scalia, who had died in February, the Republican-controlled Senate refused to hold hearings on a nominee until after the November election.

The Republicans at that time cited the “Biden rule,” referencing a Senate floor speech given by presidential candidate and former Vice President Joe Biden in 1992 where he stated that ”once the political season is underway … action on a Supreme Court nomination must be put off until after the election campaign is over.” In 2017, President Trump’s Supreme Court nominee, Neil Gorsuch, was confirmed following a historic change to Senate rules to allow Supreme Court nominees to pass a simple majority vote rather than the previous 60-vote threshold. Gorsuch was confirmed in a 54-45 vote.

On Friday night, Senate Majority Leader Mitch McConnell confirmed that the Senate will vote on President Trump’s pick to replace Justice Ginsburg despite this being an election year. In early September, President Trump released a list of more than thirty potential Supreme Court nominees, but over the weekend, he vowed to nominate a woman to fill the vacancy within a week. Possible nominees include Amy Coney Barrett, who was appointed to the U.S. Court of Appeals for the Seventh Circuit in 2017, and Barbara Lagoa, the first Hispanic woman to serve on the Florida Supreme Court, who was appointed to the U.S. Court of Appeals for the Eleventh Circuit in 2019.

Once the president has nominated a candidate, the Senate Judiciary Committee will vet the nominee and hold confirmation hearings. Following the Committee’s approval of the nomination, it goes to the Senate floor for a final confirmation vote. A simple majority (51 votes) is needed to confirm the nominee.

With Republicans controlling the Senate by a 53-47 margin and Vice President Mike Pence required to break a 50-50 tie, four Republican senators would need to vote against the nominee in order to block the nomination. Although several Republican senators, including Susan Collins of Maine and Lisa Murkowski of Alaska, have previously stated they do not support confirming a new Supreme Court justice in an election year, Senator Mitt Romney’s recent support all but assures Republicans will move forward with a vote this year.

Key Election Dates to Watch

Given the unusual circumstances under which the 2020 election will be held, with many people voting by mail amid the ongoing pandemic, there is a chance that Americans will not know who the next president is on Election Day. That said, the Constitution and federal law ensure that we will have a president on Inauguration Day.

The constitutional process and key dates in the upcoming election are outlined in the table below. Following Election Day, states have over a month to count their votes, but electoral college votes must be cast by December 14. In some cases, the Supreme Court may be called on to make a determination that leads to the ultimate victor. The last time this occurred was in 2000 when the court settled a recount dispute over votes cast in Florida, which resulted in George W. Bush being awarded Florida’s 25 electoral votes and becoming the 43rd President of the United States. (Note that Florida has 29 electoral votes in the 2020 election.)

Only two presidential elections have been determined through a contingent election process: the elections of 1800 and 1824. Originally, the Electoral College determined both the president and vice president, with the president receiving the highest number of votes, and the vice president the second highest. In the 1800 election, Thomas Jefferson and Aaron Burr tied at 73 electoral ballots each. Jefferson eventually won the majority of state delegations and became president. Following this experience, the 12th Amendment to the Constitution changed the election process so that the Electoral College would be required to hold separate votes for president and vice president. The amendment also made it so that when a candidate does not receive a majority of the appointed electors’ votes, the decision goes to the House of the Representatives, with each state allotted one vote. This came into play in 1824, when Andrew Jackson won 99 votes in the Electoral College, 32 short of a majority, and John Quincy Adams won 85 votes. The House ended up electing Adams as president over Jackson.

Market Implications

In an already unprecedented election season, with the country dealing with a global pandemic and the economy in repair, Justice Ginsburg’s death adds yet another variable of uncertainty. U.S. equities were down on Monday, with the decline due to a combination of factors. First, negotiations on another round of fiscal stimulus are likely dead given the Senate’s pivot to put forth a Supreme Court justice nominee quickly. Second, there is increased concern about what the potential addition of another conservative justice could mean in a contested election. Third, there is continued rotation from those technology names that have led the equity rally since March to more cyclical names. And, finally, there are worries about tighter virus restrictions in parts of Europe due to a spike in COVID-19 cases and what the colder weather could mean for the path of the virus.

The fight to fill Justice Ginsburg’s seat will play out over the coming weeks and what impact it may have on a contested election outcome, should there fail to be a decisive victor, remains to be seen. We have been predicting higher market volatility heading into and beyond the election and believe that pattern is likely to persist given this latest development. Client portfolios are prepared for this period of uncertainty with a neutral position to equities within a fully diversified portfolio. We have recently reduced exposure to U.S. large cap equities, making us better positioned to withstand near-term volatility that may transpire in U.S. markets. 

The passing of Justice Ginsburg—a pioneer for woman’s rights and equality—has drawn strong emotion among many. However, as we often advise, it is best not to let the emotions of politics unduly influence investment decisions and instead stay committed to one’s long-term investment plan. 

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