Our last two publications have assumed the Republicans are able to maintain control of the Senate. However, there is a strong likelihood the Democrats could capture it and control both houses of the Congress. With the Senate turning blue, this week’s scenario also includes the assumption of a red White House, with President Trump remaining in office.
Hotly-contested Senatorial battles in Alabama (between incumbent Democrat Doug Jones and football coach Tommy Tuberville), Arizona (between incumbent Republican Martha McSally and former astronaut turned-Democrat politician Mark Kelly), Maine (between incumbent Republican Susan Collins and Democrat Sara Gideon), Georgia (between incumbent Republican David Perdue and Democrat Jon Ossoff), and Michigan (between incumbent Democrat Gary Peters and Republican John James) are some of the more intriguing battles, and could ultimately decide the outcome. Inevitably though, the bottom line is how successful the Democrats are in stealing GOP seats, as they need only defend 12 this election, while the Republicans must protect 23. The DNC doesn’t have to take away many, just a few will do.
What does this mean for an outlook on government and legislation in the years to follow? What about on capital markets, which is the reason behind this series? Well, you should expect more gridlock and a slightly more defensive posture in your investment portfolio, though not as defensive as in a complete Blue Wave.
If history is an indicator, which it often is, we can probably guess how the White House behaves over the next two years or would like to behave. However, the President will have to work with the Democrats on Capitol Hill if he wants to get anything done, and vice versa. What does the crystal ball suggest?