The One Washington Scenario That Would Stun the Markets
Author: Greg Valliere
November 14, 2022
BUT THERE’S ONE SCENARIO that would be a stunner in Washington and on Wall Street: Democrats’ retention of the House, which is doubtful but not totally out of the question as recounts continue this week.
MOST ANALYSTS, INCLUDING US, think the Republicans will win just enough seats to capture the House, perhaps with a majority of a half dozen seats. That’s dramatically lower than we expected a week ago, but it’s enough to give the GOP an effective veto over progressive legislation proposed by President Biden and the Democrats.
THIS COULD GET MESSY FOR THE REPUBLICANS, who face a simmering revolt from the far right, which could block the election of Rep. Kevin McCarthy, the very shaky favorite to become House Speaker. What initially appeared to be a disappointing election for the GOP could be a disastrous outcome if the party can’t pick a Speaker for weeks to come.
McCARTHY WILL HAVE TO MAKE CONCESSIONS to the far right, which would reinforce the GOP’s albatross: moderate voters think Republicans are too extreme, yet McCarthy will have no choice but to deal with the Freedom Caucus and other House hard-liners.
PRESIDENT BIDEN, MEANWHILE, now has a Senate majority that doesn’t depend on Sen. Joe Manchin, and Biden will prevail with dozens of judicial appointments, which require a simple majority. Biden would like to press ahead with more spending and tax hikes, but that would be blocked in the House — assuming the Republicans maintain control.
WE THINK GRIDLOCK will dominate, with bitter battles over spending that will resume soon. Between now and Jan. 3, when the next Congress convenes, a lame duck session will heat up over spending; Biden and the Democrats are determined to raise the debt ceiling and agree on a massive budget package before the current deal expires in mid-December.
REPUBLICANS ON THE DEFENSIVE: They’re bitter over the election surprise, which showed more support for Democrats than the polltakers — wrong again — had predicted among young women, Hispanics and independents. Now the GOP has to deal with Donald Trump.
THE INTENSE ANTIPATHY TOWARD TRUMP within the party is now out in the open. Trump was besieged with pleas this weekend as party leaders — and the Murdoch news empire — begged Trump not to announce his candidacy tomorrow. But it appears that he’s determined to announce nearly two years before the next election, dividing the party even more.
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.
©2023 AGF Management Limited. All rights reserved.
