by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
August 30, 2021
Democrats Concede That the House May Be Lost;
Senate Now In Play
August 30, 2021
IT’S IMPOSSIBLE TO OVERSTATE the consensus in this city that Democrats are likely to lose the House next year; the issue is whether they will lose more than a dozen seats. And now the Senate is in play, as President Biden’s job approval ratings plunge.
WE FOUND ONLY ONE DEMOCRAT this weekend who believes the party can rebound. She thinks the Biden Administration will get more American allies out of Afghanistan, will provide quick aid to Louisiana, and will enjoy a strong unemployment report this Friday.
THAT UPBEAT SCENARIO overlooks the Delta variant, which is ripping through the South. That’s not Biden’s fault, but his declaration of victory on July 4 now looks badly premature, as the country prepares for booster shots and grapples with confusing guidance.
AS WE OFTEN WRITE, political capital is crucial. After Biden’s disastrous
Afghanistan pullout, his political capital — and polling numbers — have plunged, as
moderate Democrats distance themselves from him. The Republicans need to gain only four net seats next November to capture the House; we’re now up to 65% that they will. The GOP could gain 10 to 15 seats.
BIDEN’S POLITICAL CAPITAL was always fragile in the Senate, which is tied at 50-50. We now think odds slightly favor the GOP capturing the Senate as well, although there are unknowns — for example, will controversial Republican Sen. Ron Johnson seek re-election in Wisconsin?
BUT EVEN IF BIDEN LOSES JUST THE HOUSE in 2022, his agenda would be effectively finished; he would have to play defense, using his veto power frequently. A Republican House would spend much of its time holding hearings on Afghanistan, and a loud minority of GOP lawmakers would press for Biden’s impeachment (there’s no chance that 2/3rds of the Senate would vote to convict).
BIDEN SURELY IS AWARE that the House could fall to the GOP, so he’s determined to move quickly on his agenda of massive new infrastructure spending and higher taxes. The problem is that wavering moderate Democrats are increasingly leery of huge new spending and tax hikes, and their constituents — who see a link between
spending and inflation — may be leery as well.
THIS IS ALWAYS A CRUCIAL PERIOD for politicians — they listen to voters during the late summer break, and what they’re hearing about Biden isn’t pretty; there are growing doubts about his judgment. As moderates peel away from him, Biden’s strongest support comes from progressives — but that’s a mixed blessing in a general election.
DEMOCRATS NEED A VICTORY, and they could get one in California on Sept. 14,
when voters may reject a recall of Gov. Gavin Newsom. If he loses, a sense of panic
will envelop the party; more moderates would flee — and the two huge infrastructure
bills would be in even greater trouble.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2021 AGF Management Limited. All rights reserved.
This post was first published at the AGF Perspectives Blog.