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Could Election Uncertainty Put Holiday Spending on Ice?

The longer it takes for a winner to be declared in the presidential election, the greater the chance consumers will move to the sidelines.

“The uncertainty will have an impact on the consumer. We’ve seen strength over the past couple of months. August, September and October have seen an increase in consumer spending. But we are hitting election uncertainty, which could put a pause in consumer spending. Consumers on both sides of the aisle have genuine concerns about the other side of the aisle,” said Greg Portell, lead partner in the global consumer practice at consulting firm Kearney.

Retailers in general have done a good job of spreading out the holiday shopping period, with a host of Black Friday sales pulled forward for an earlier start to the selling season. An election result delay of just a few days will likely lead to a bit of pent-up demand that could bode well for spending. But if it starts to look like an extended two- to three-week delay going into Thanksgiving, that could potentially pause and possibly even evaporate consumer spending, Portell said.

If there are challenges to ballot counts, much will depend on how credible those arguments are. A real debate over the counting of votes will extend the uncertainty, but a challenge based more on political positioning and posturing will likely see the consumer move on, Portell contended.

The Kearney executive sees potential for retailers to have a strong holiday season, even though any additional federal stimulus seems to be delayed until after the biggest holiday shopping days have passed. Senate Majority Leader Mitch McConnell said at a press conference Wednesday afternoon—the day following his reelection—that enacting a Covid-19 stimulus bill will be Congress’ top priority when it goes back into session next week. Another rescue package needs to come “before the end of the year,” he added.

But there are other potential problems looming on the horizon—an extended, bitter battle over election results coupled with the potential for another series of lockdowns as coronavirus infection rates begin rising again. When that might occur would be key. “The big question is how many shopping days will be left. If if comes at the back end of the shopping season, that would mean a lot of problems,” Portell said.

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Compounding the matter is the very real possibility that some consumers are now starting to feel a bit of “Covid fatigue,” he said. That’s the new buzzword to capture the malaise that some consumers are experiencing after seven interminable months of being mindful and cautious. Now they might be less careful about precautionary measures, raising the possibility that virus infection rates could spike.

If that were to happen, at least in the U.S., most likely local governments and states could have the final say on whether a localized shutdown is needed. But that too could depend on who wins the election and whether a change in the administration might result in some form of a national lockdown. There’s already been talk that if Democratic nominee Joe Biden wins, he would implement a national policy in favor of wearing masks, and might not hesitate to impose a new lockdown.

According to Solita Marcelli, head of UBS Chief Investment Offices Americas, market volatility is all but certain “if we do not know the results in a short period of time, and if the elections are still contested after all the votes are counted.”

“Covid cases are resurging in most of the Western world,” Marcelli added, “and the future administration will need to figure out how to handle the economic fallout from the potential restrictions on the economy, at a time when millions are already suffering because of massive unemployment in the physical service sectors.”