by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
THE MOOD ON CAPITOL HILL among Democrats is so sour that the issue isn’t whether the Democrats will lose the House — it’s the size of the margin. We thought most of this past winter that the Democrats would lose about 15 seats, but that’s too low. Consensus is about 25 seats and rising.
SINCE THE GOP NEEDS TO WIN roughly five net seats to capture the House, a takeover now looks very likely; just redistricting and historical trends alone would point to far more seats for the Republicans. In the Senate, tied 50-50, Republicans have a slight lead but Mitch McConnell worries that the party has not recruited great candidates (see: Herschel Walker in Georgia).
AT THE CORE OF THIS NARRATIVE is the astonishing plunge in Biden’s job approval rating, now down to 33% positive in the latest Quinnipiac poll and in the high-30s in several other surveys. Particularly worrisome for Democrats is a sharp drop in Biden’s job rating among Hispanics and young people; both are under 50% and falling.
INFLATION OBVIOUSLY IS THE MAJOR REASON for Biden’s plunge, with approval of his handling of the economy in the mid-30s. He also has slumped badly on his handling of illegal immigration and urban crime, two issues that have gotten worse for the Democrats in recent days.
THE THREAT OF A HUGE SURGE OF IMMIGRATION is so politically toxic that about a dozen Democratic Senators have distanced themselves from Biden on the explosive issue of lifting Title 42 restrictions, which would make illegal immigration far easier.
IS THERE ANY HOPE FOR THE DEMOCRATS? There’s a chance that Republicans could over-play their hand on abortion and other social issues; there’s fatigue over re-litigating the 2020 presidential election, which Donald Trump clearly lost; and there’s an unwillingness of GOP leaders to detail what they would do if they take control of the House.
BUT IT WOULD TAKE A SHARP DROP of inflation — seemingly not imminent — to boost Biden’s numbers. The inflation medicine essentially is higher interest rates — but as the 10-year bond yield approaches 3%, anxiety over housing will increase, hardly a plus for Biden.
EVEN ON UKRAINE, where Biden gets decent grades, there’s the beginning of discontent that he should spend more time on domestic issues.
THE BIDEN SPRING AGENDA: He plans to revive proposals such as prescription drug price controls, funding for pre-kindergarten education and spending on environmental upgrades. Sen. Elizabeth Warren doubled down on these proposals in a New York Times op-ed this morning, but our sense is that there’s little support for more spending.
IF DEMOCRATS LOSE JUST ONE OF THE TWO HOUSES, Biden’s agenda would be dead in the last two years of his term. He would have veto power, but virtually no new initiatives could pass in a bitterly partisan House, where at least a third of Republicans want to impeach him for any number of reasons.
BOTTOM LINE: House election results on Nov. 8 are likely to repudiate Biden, who will become a scapegoat for Democrats in this city. Despite Biden’s assertions that he will run again, the whispering will grow louder that he will be a one-term president, as his 80th birthday approaches on Nov. 20, just two weeks after what probably will be an election disaster for the Democrats.
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.
©2022 AGF Management Limited. All rights reserved.
This post was first published at the AGF Perspectives Blog.
