Who won?!

While the markets and investors like definitive, black and white, quantitative answers, the unfortunate reality is that some state and local boards of elections are just slower to count ballots, which can delay election results for days and even several weeks, Michael Townsend, Schwab's managing director for legislative and regulatory affairs, warned advisors today.

“There’s a very good chance we will not know who wins the White House when the market opens on Wednesday, and possibly for a few days after that,” Townsend said during a company webcast.

Townsend, Schwab’s chief lobbyist, reminded webcast attendees that the presidential race in 2020 was not officially called for Joe Biden until just before noon on the Saturday after election day.

“That’s when Pennsylvania was finally called,” Townsend said.

The results for Nevada were called later that same day, while North Carolina was not called until 10 days later and Georgia’s results were not called for 16 days after the election.

Both Georgia and North Carolina ended up with hand recounts after the election, which is why it took so long, he said.

This election, there are more than a dozen House of Representative seats in slow-counting states like New York, Pennsylvania, Washington state and especially California. “That could mean we’re well into to the weekend and possibly into next week before we know who won the House of Representatives,” Schwab’s top policy professional said.

“Obviously that could lead to increased market volatility and investor anxiety. I think the longer there is volatility, you start to worry about things like civil unrest and extended court challenges and a lot of confusion. I don’t think the Senate will take very long to count at all. I think Republicans have a lot of options and only need a couple of seats to win the majority. But I do think the House would take quite a while, probably a week or more,” warned Townsend.

“We all need to help investors keep these emotions in check when it comes to making their investment decisions,” he added.

Ultimately Townsend believes there is a high likelihood for a split Congress, with Republicans taking the Senate and Democrats potentially squeaking out a win in the House.

“I don’t think we’re going to get much of a surprise in the Senate. Republicans are heavily favored to win the majority. I think they’ll be a surprise if they do not,” he said.

The fate of 435 races in for House seats, however, and especially the 25 tossup races, are less clear.

Townsend said “the underrated part of the election for me is just how close I think the House of Representatives is going to end up. ... I think we could end up with a really narrow majority in the House for whatever party wins. And ultimately, we need to know which party controls all three [government branches] before we can really start thinking about how some of the big policy issues like the debt ceiling and tax reform are going to play out in in 2025,” he said.

Townsend warned that 2025 could be an extreme case of a divided Congress. “I think that is a real possibility. It could be next to impossible to get much of anything done.”

Townsend reminded advisors that the lame duck session of Congress starts on Monday. “The big thing for Congress is they have a looming deadline of December 20th to pass government funding," he said. "I would not be surprised if both chambers just ended up punting the whole issue to 2025 and passed another temporary extension and let the new Congress deal with. But you know, I don’t think we can rule out the possibility of a government shutdown right before Christmas.”