Political polling season has arrived and serious minded people need to be wary. If you believe the coming election is important to your investment strategy and you want to approach the election with a clear head, take polls with a grain of salt.
There’s a simple, unassailable truth about polls in the last election: they routinely surveyed more Democrats than Republicans, leading, we believe, to skewed results - a massive head fake that rippled through the markets. I recommend that you not react to polls. Or, better yet, see for yourself by finding the details of how each survey was conducted. Here are a few recent examples of polls that garnered big headlines but that might just be inaccurate.
On July 15th, headlines in the Wall Street Journal and NBC roared, “Trump trails Biden, Warren, and Sanders” citing a recent poll, but is this really the case? Upon further investigation, the poll is comprised of 42% Democrats, 36% Republicans, 12% Independent, and 10% “other” or “not sure”. The categories “other” and “not sure” are left undefined, but they almost certainly contribute to what appears to be a misrepresentation. Recently, CNBC followed the same playbook, broadcasting headlines, “Trump Not Boosted by Strong American Economy”. They reached this conclusion from the results of a poll conducted by the Associated Press- National Opinions Research Center in June. Respondents were asked if they approved of the overall job done by the president and if his tax cuts were benefiting them. Only 39% of individuals approved of Trump and a measly 17% of people claimed they benefited from his tax policy. Both of these figures are strikingly low, with 39% being the lowest average approval rating in decades. Taking a closer look, the poll lacks accuracy at its core. Out of 1,116 adults, 46% were Democrats, 36% were Republican and 44% were unemployed. If a ten percentage point difference in the political party wasn't enough to facilitate a bias, 44% unemployment ought to do it.
On August 13th, headlines blared about a Fox News poll ranking the Democrats and declaring that if the election was held today, Donald Trump would lose to each of top three Democrat candidates. This poll hit the mainstream news echo chamber for a week as the press fashioned any number of doomsday headlines (to which Donald Trump had to respond that he "was not happy with it," according to Vanity Fair). Of course, that statement hit the news for another week. Here, too, it appears that the results are skewed. It turns out that Fox News polled 8% more Democrats than Republicans.
For proof of the distorting effects of such polling, just consider the Trump vs. Clinton race in 2016. Out of twenty polls conducted by some of the most reputable news sources in the U.S., there was only one (IBD/TIPP) that gave Trump the edge on election day. Most of these polls gave Clinton a 70% chance to win and some were 99% convinced. Not surprisingly, CNBC published an article titled, “Trump Victory All but Impossible Based on Previous Races” a month before the election. Obviously, CNBC was pretty far off the mark. Again, attention to detail matters . In the research conducted in October 2016, 43% of the individuals interviewed were Democrats, 36% were Republicans, and 16% claimed to be Independent. Based on their prediction and the real outcome of the election, it’s possible that seven percentage points is more than just a rounding error.
Please click here to read the entire article in Forbes.