A Disputed Senate Outcome as Well?
Author: Greg Valliere
September 11, 2020
THE OTHER BIG ELECTION: In a year as crazy as 2020, it’s fitting that elections for the Senate this fall could produce a 50-50 tie and recounts, just as the presidential race could be disputed. We might not know who controls the Senate until a special election in Georgia in early January.
LET’S TAKE A QUICK LOOK this morning at how two states could get us to a deadlock, which would be broken by the party that wins the White House.
FIRST OF ALL, WE EXPECT A CLOSE PRESIDENTIAL RACE: If Joe Biden wins in a blowout, the Senate, now 53-47 Republican, almost certainly would fall to the Democrats. Likewise, the GOP would probably keep the Senate if President Trump wins re-election.
ASSUMING A CLOSE PRESIDENTIAL RACE, The Democrats are likely to lose only their seat in Alabama. although an upset in Michigan, where the Democratic
incumbent is not comfortably ahead, can’t be ruled out. But in all likelihood, the Democrats would need to pick up four GOP seats in order to get a tie, giving them control of the Senate if Biden wins the presidency.
CAN THE DEMOCRATS PICK UP THOSE FOUR SEATS? They’re clearly ahead in Colorado and Arizona, which means they would need to capture two more seats — in North Carolina, where GOP Sen. Thom Tillis is trailing slightly, and in Maine, where veteran moderate Susan Collins is trailing slightly but has a history of finishing strongly. All the Republicans have to do is retain either of those two seats and they probably would keep the Senate.
IF BIDEN WINS NARROWLY, WE COULD SEE only a three seat net Senate pickup for the Democrats, which would keep the GOP in Senate control. If Biden wins easily, perhaps another two or three Republican seats — in Montana, Iowa or Georgia — could fall and the Democrats could have something like a 52-48 Senate majority.
WHY IS THIS IMPORTANT FOR INVESTORS? If Republicans lose the Senate, the Mitch McConnell firewall — which has blocked progressive legislation from the House — would crumble. It’s also important for investors because a tie could keep Sen. Elizabeth Warren in her Senate seat; the GOP governor of Massachusetts would appoint a Republican if she left to become Treasury Secretary, a prospect that worries the markets.
A HUGE WILD CARD: If the Democrats take control of the Senate, they could be tempted to change filibuster rules, which would give them the ability to pass legislation by a simple majority, without getting 60 votes, which is required now to cut off filibusters. This would NOT be a good story for financial markets; anxiety would escalate over sweeping new taxes and big new government programs sailing through both houses.
OUR BOTTOM LINE is that it’s too early to be sure that the Republicans will lose
control of the Senate. That would require Collins losing in Maine and Tillis losing in
North Carolina, and we have a hunch that one of them could prevail, potentially leaving the Democrats one seat short of their goal. Much depends on whether Donald Trump can get his act together and stay on message in the next seven weeks.
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.