Senate Update — GOP Still Has a Chance; Filibuster Change Is a Huge Issue
Author: Greg Valliere
July 15, 2020
YESTERDAY’S SENATE PRIMARY IN ALABAMA was a repudiation of Jeff Sessions and a retribution for Donald Trump — but there’s a bigger angle: it keeps alive the GOP’s prospects of maintaining narrow control of the Senate next year. And an even bigger controversy looms — changing Senate filibuster rules.
THE THREE SENATE SCENARIOS: If Trump wins re-election, the Senate should stay Republican. If there’s a Biden landslide, the Democrats should easily capture the Senate. But if the election is close, the GOP would have a chance of keeping the Senate. (The House isn’t in play; Democrats will maintain control.)
WE THINK THE PRESIDENTIAL RACE WILL NARROW, as Trump mocks Biden’s mental acuity and targets the Democrats’ activist agenda of tax hikes and huge new government programs. If Biden’s lead fades, here’s how the GOP could still keep the Senate:
First, the Democrats’ Alabama seat is likely to fall to former Auburn coach Tommy
Tuberville, who won easily last night. So the GOP Senate majority, now 53-47, will
effectively increase to 54-46 (the Democrats have only one other vulnerable seat, in
in Michigan, where they’re favored).
Second, the likely Alabama flip means the Democrats would need to pick up four GOP seats to gain a 50-50 tie, which would be broken by the party that controls the White House. So if Biden wins, where are the four pickups? Arizona (probable), Colorado (probable), Maine (possible) and North Carolina (tossuup).
Could the Democrats pick up all four of those seats? We think there’s a slightly
better chance that they’ll win three of those seats rather than four — if there’s a
reasonably close presidential race. If there’s a Biden blowout, the Democrats would
win those four states and perhaps another two or three in Iowa, Georgia, Montana, etc.
IF THE ELECTION WERE HELD TODAY, Biden and the Democrats would win decisively, capturing the Senate. But the election is on Nov. 3, and by then the Democrats might be looking at a net pickup of only three seats. So while Republicans are underdogs, it’s too early to proclaim that they will lose the Senate.
* * * * *
THE BIGGEST WILD CARD ON CAPITOL HILL is the possibility that if Democrats capture the Senate, they will attempt to alter filibuster rules, which would be a huge story for investors who follow taxes, Medicare for all, the Green New Deal, etc. Instead of needing 60 votes to cut off debate, many Democrats want a simple majority, which would be a dramatic development that would break legislative logjams.
BIDEN SURPRISED SOME HILL WATCHERS this week by stating that he’s willing to consider a filibuster change. A veteran of 35 years in the Senate, Biden had been considered a traditionalist, unwilling to make a radical change in the filibuster rules. But he now feels that if wily Mitch McConnell bottles up his agenda next year, the rules may have to be re-written.
THIS WOULD BE A DRAMATIC CHANGE in Senate rules; it sounds appealing to many Democrats now, but at some point in the future they would be on the losing end of a new equation, as they discovered when Harry Reid ended the 60-vote filibuster for judicial appointments, which McConnell has exploited masterfully.
THIS MAY SOUND LIKE AN ARCANE DEBATE, but a change in the filibuster rules would be enormously important, so the financial markets need to carefully monitor this issue. If Biden wins and the Democrats break all ties, they could move to scrap filibuster rules — allowing them to pass a potentially market-unfriendly agenda.
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 Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI is registered as a portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. 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.
© 2020 AGF Management Limited. All rights reserved.