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Trump, Biden locked in close race as U.S. awaits results

Yahoo Finance's Myles Udland, Brian Sozzi, Julie Hyman, Andy Serwer, and Rick Newman break down the latest updates in the 2020 Presidential Race and discuss how it’s impacting the stock market.

Video Transcript

- I want to bring in to this conversation Yahoo Finance Editor-in-Chief, Andy Serwer, as well as Yahoo Finance Senior Columnist, Rick Newman. Rick, let's start with you. Because we were just chatting with Andy about the divided nature of government as we go forward from here, even if Joe Biden is to win the White House. And

I guess as you reflect on the last, you know, 18 hours here, really, are you surprised by the way things broke? Or are you surprised by how sure the market seemed last night that Trump would win re-election? Surprised by the reversal we've seen today? And does this change your thinking, I guess, about the state of play in US politics going forward?

RICK NEWMAN: The one thing that has surprised me is that the polls seem to have been at least as wrong as they were in 2016. All the pollsters said, we know what went wrong in 2016, we fixed it in our models. They seemed to be right about that in 2018, but clearly they overstated Biden's strength across the board.

So I think what everybody should do this morning is just reset expectations. So forget about what you thought was going to happen last night. Look at what seems to be happening right now. It does seem like Joe Biden is going to be the next president.

I mean, we're going to be going through these permutations of the vote. But they're getting pretty narrow, and if Biden-- Biden now holds a narrow lead in Wisconsin in Michigan, which he is probably going to hold on to, because the votes that are coming in-- that are being counted last are the mail ins that lean Democratic. So if Biden holds onto those two states, and he holds Nevada, he wins.

You can talk about a thin margin, but remember again what happened in 2018. It looked like a very modest Democratic gain in 2018, and it ended up being a bigger gain than it looked like the first moments after the election.

I'm also not sure that Republicans are going to hold onto control of the Senate. I mean, we've got this one race in Georgia we know it's going to be a runoff. And we do not yet know the outcome in Maine and a couple other places. So Democrats have now narrowed the Senate based on outcomes, we do know to 52, 48. And if they do get control, it's obviously going to be with a very narrow margin, but it's still possible.

So the scenarios I've heard analysts talking about this morning are a Biden presidency with a Senate that is controlled by Republicans. And even though that's not what the polls were suggesting, that's a big change.

- Andy Serwer, get in there.

ANDY SERWER: Oh, I thought you wanted the question to Rick. So listen, I think that Rick is probably spot on. Listen, we're probably going to get some sort of divided government here, right? With, you know, the House, Senate, and the presidency. And I just want to speak to this assertion that that's good for business and the economy, right? And oh, it's great, because gridlock in Washington is good because politicians always mess things up and we have to leave it to business to get things done.

And that is a false assertion for a couple reasons. Because number one, it has been divided up-- when there is gridlock, it has been between periods where we've had government that has taken on and accomplished all kinds of things. Going back to the Great Society, clean air, clean water, Reagan tax cuts, Clinton tax reform. That's number one.

And number two, even when we did have gridlock, both sides of the aisle were talking to each other. So we had Ronald Reagan and Tip O'Neill, and then we had Bob Dole and George Mitchell having dinner every week. So when it came down to important issues, even in these times of gridlock, we were able to get things done in Washington. And right now we're in a very different place.

So gridlock now is not what gridlock used to be. And I think it's not necessarily a good thing for the economy and the markets, even though stocks are rallying today.

[INTERPOSING VOICES]

- So if you can imagine the QAnon Supporter in, what, Georgia sitting down with people on the other side of the aisle. Rick, I wanted to ask you something really quick about the polls. Which is, why do we need them? In other words, if there were no polls anymore, if we didn't know in advance anymore, would it matter?

RICK NEWMAN: It would matter. I mean, it starts with the campaigns themselves. I mean, they need to know where to focus their efforts. And I think it's fair to say the Trump campaign did a pretty good job of that. And the only reason-- the only way you know that is to do-- they have to do their own internal polling.

And those internal polls at the campaigns are generally considered better than the public polls. Because they spend more money, they have bigger samples, and they have to. Because that's how they-- that determines whether they win or lose.

I mean, we did see Trump late in the campaign, those rallies. I mean, a lot of us were pretty tuning out where he went, but he did go to areas where it was really important for the Trump campaign not to convince people to vote for Trump-- he went to places where he's popular-- but to convince people who might not otherwise vote to get out and vote.

And I think one of the big takeaways from this election is, we know that voter turnout was up just about everywhere. But Trump apparently managed to get more of those base voters to go vote than he got in 2016. So those are white working-class voters.

So Trump actually-- you know, demographers have been saying that demographic is shrinking. But Trump got more of them to vote. So he may have-- he may have actually enlarged his base, and that was because he knew where to campaign.

As for the polls that all the rest of us look at, sure, I guess in the media we could just not pay attention to the election. But I just-- it's just not going to happen. I mean, we want to know as much as we know. We want to measure what we think we can measure. And I think the polls are not going away as flawed as they are.

- Andy, I think so many folks in the street that I've talked to so far are trying to figure out why the NASDAQ is up about 4% coming out of the gate. You cover-- you have covered big tech extensively in the lead up to the election. Why do you think we're seeing that move in the NASDAQ? I mean, Biden has come out, he has sounded the alarm bells against section 230.

ANDY SERWER: Yeah, I mean, I think maybe it's a, you know, risk off trade, right? That there's just some resolution in the air. And, you know, I feel people are just getting into the markets. And that is the higher beta play, and it's responding that way.

It's very hard to-- remember, the markets always move based on what you think other people are thinking, right? So it's sort of the derivative of your original thought. So I think people are thinking this, so I'm doing that. If you follow.

- I follow.

RICK NEWMAN: Hey guys, keep in mind a split-- divided government actually makes it way harder to enact any kind of new regulation on tech. Even if the two parties generally agree on the issue, they're not going to agree on legislation. So that could be part of the play here.

ANDY SERWER: There's the gridlock again.

- Yeah.

- That's right.

- That's right, you can't regulate Facebook if we can't get consensus that they are actively suppressing conservative voices on the platform. You know, it's just not going to happen. All right, Rick Newman, Andy Serwer, thanks guys.