by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
October 7, 2020
A BLUE WAVE IS FAR FROM CERTAIN: As Joe Biden’s lead continues to grow, many analysts are assuming that there will be a blue wave — the Democrats capturing the White House, keeping the House and gaining control of the Senate. That’s possible but far from certain.
The three elections —
1. Control of the House isn’t in doubt. Republicans need a net gain of 21 seats to
win control, but that’s not going to happen; they may lose a handful of seats.
2. The presidential polls show Biden with a 9% lead in the Realclearpolitics average, and CNN had Biden leading by an astonishing 16 points yesterday. We think that number is too high, but it appears that Biden is pulling ahead in key battleground states like Michigan and Pennsylvania.
3. Then there’s the Senate, the crucial part of this trifecta. The Democrats can gain
control with a net gain of three seats. They’re very likely to lose one seat, in Alabama, which means they would need to capture four GOP seats. Democrats lead in Colorado, Arizona, and probably Maine — but that leaves them one seat short.
THAT FOURTH SEAT FOR THE DEMOCRATS was widely assumed to be in North Carolina, where GOP Sen. Thom Tillis has looked shaky. But that race has been rocked by disclosures that the Democrat, Cal Cunningham, sent racy emails to a campaign worker; now there are reports that they covered up a relationship (Cunningham is married).
CUNNINGHAM HAS PROFUSELY APOLOGIZED, but this race could become a tossup in the final month of the campaign. If the Democrats lose this race, they would have to hunt for one more seat — perhaps in Georgia, Montana, Iowa or even South Carolina — but those are conservative states.
BOTTOM LINE: Thanks to North Carolina, we’re only at 55% that the Democrats will capture the Senate. And if a Biden win looks likely, Republicans will urge voters to prevent Democrats from controlling everything, and ballot-splitting is possible. Bottom line: if Biden wins only narrowly, the Senate may stay Republican; if he wins comfortably, the Senate will fall. But, again, a blue wave is not certain.
* * * * *
CONFUSION ON STIMULUS: After apparently pulling the plug on a pandemic stimulus bill, President Trump threw a curve ball last night, calling for $1,200 stimulus checks, $135 billion for small businesses and $25 billion for airlines. So are the talks dead or not?
THE INTENSE ANIMOSITY BETWEEN TRUMP and Nancy Pelosi makes any type of deal unlikely until later this year or 2021, despite pleas from Fed Chairman Jerome Powell and most economists to provide a booster shot for the economy, which could falter by winter.
WE STILL THINK THERE WILL BE A DEAL, but it’s probably coming later rather than sooner. Pelosi has restive troops who may be tempted to take the $1,200 checks, but she wants a far more comprehensive deal, with major aid to state and local governments. That’s a non-starter with most Republican lawmakers.
EVEN IF PELOSI AGREES TO A DEAL with Steve Mnuchin (unlikely but not out of the question), we cannot envision Mitch McConnell and the Republicans accepting anything that costs more than $1 trillion. Millions of Americans, facing evictions and bankruptcies, will continue to be pawns in this bitter political battle.
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This post was first published at the AGF Perspectives Blog.