The election analysis provided by Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any candidate or political party.
With the presidential candidates all but certain—if not yet formally nominated—the next big question is: Who will they choose as their running mates?
Expect both Donald Trump and Hillary Clinton to make their vice-presidential selections between July 4 and the start of their respective party gatherings: July 18 for the Republican National Convention in Cleveland and July 25 for the Democratic National Convention in Philadelphia. Each candidate will likely treat the announcement as a major media event and try to get two or three days of news coverage out of it.
On the Republican side, speculation has centered on former House Speaker Newt Gingrich and current New Jersey Governor Chris Christie, two of the most visible Trump supporters. Sen. Jeff Sessions, R-Ala., the first U.S. senator to endorse Trump back in February, is another possibility, as is Sen. Bob Corker, R-Tenn., though Corker has been critical of some of Trump’s recent campaign rhetoric.
We think there is still a good chance that Trump will choose a running mate from outside the political arena. A splashy, unconventional pick would be in keeping with Trump’s campaign style.
For Democrats, a slew of names have been mentioned, including U.S. Secretary of Labor Thomas Perez and U.S. Secretary of Housing and Urban Development Julian Castro. A half-dozen or more sitting U.S. senators are also reportedly in the mix, including Cory Booker, D-N.J.; Sherrod Brown, D-Ohio; Tim Kaine, D-Va.; Amy Klobuchar, D-Minn.; Jeanne Shaheen, D-N.H.; Elizabeth Warren, D-Mass.; and Mark Warner, D-Va.
Factors to consider
Both candidates will consider myriad factors in making their choices. There are geographical considerations: Nominees often pick running mates from a different part of the country to broaden their regional appeal. A vice-presidential pick who is a popular politician in a particular battleground state may help turn the tide in that state, affecting the electoral vote in the fall.
Experience is another factor. Sometimes a less-experienced candidate will pick a veteran politician, as President Barack Obama did eight years ago when tapping longtime U.S. Senator Joe Biden of Delaware. The opposite strategy was one reason veteran Senator John McCain chose the younger, less-experienced Sarah Palin as his running mate in 2008.
There are also policy considerations. Of course, running mates need to be aligned with the top of the ticket on key policy matters. But presidential nominees often pick running mates with expertise in policy areas where they are not as strong. Biden’s foreign policy experience, for example, was seen as a complement to Obama, who had less experience in that area.
Does the vice-presidential pick matter?
Historically speaking, the vice president has almost never been a significant factor in an election outcome. In fact, a recent book by two political scientists crunches the data from more than a century’s worth of presidential elections to debunk the myth that vice-presidential nominees can deliver elections in their home states—the so-called home-state advantage.1
But in this election, we see the picks as more significant than usual. Both candidates have historically high negative ratings—a mid-June ABC News/Washington Post poll found that 70% of Americans viewed Trump unfavorably, while 55% viewed Clinton unfavorably.2
That means voters and the media are likely to scrutinize the running mates carefully to see how they complement the nominees and what their choices say about the leadership styles of Clinton and Trump.
What should investors keep in mind?
Vice-presidential selections have not traditionally been market moving events, and we don’t think this one will be either. But we do think the announcements have the potential to influence the race more than usual as the two candidates head for their coronations at the party conventions in July.
It can be hard to ignore the headlines, but remember: The media sells advertising, not helpful investment guidance. Even in an unusually contentious election season, it’s best to ignore the noise and stick to your-long term financial plan.
1 Christopher J. Devine and Kyle C. Kopko, The VP Advantage: How Running Mates Influence Home State Voting in Presidential Elections.
2 Scott Clement, "Negative Views of Donald Trump Just Hit a New Campaign High: 7 in 10 Americans," The Washington Post, 6/15/2016.
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