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The race for Congress | Road to the Midterm Elections · UBS Trending

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  Hello everyone, and
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  welcome to UBS Studios award winning series,
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  Road to the Elections.
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  This time around,
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  with a focus on the upcoming midterm
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  elections here in the United States in November.
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  I'm Anthony Pastore, thank you for joining me once again.
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  As we discuss
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  what matters
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  most at the intersection of policy and markets
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  for this discussion today, my guest is Joe Wall,
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  the Head of Government Affairs and Public Policy at BlackRock.
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  Joe, welcome to the show.
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  It's really nice to have you.
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  Thanks for being with us today.
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  And, you know, I look,
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  there's a lot
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  we can talk about with this upcoming midterm election.
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  And under
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  normal circumstances,
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  midterm elections don't usually get a whole lot of attention.
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  But this one obviously seems to be getting some.
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  Let me ask you, just, Joe, as we start off,
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  how much of the current political environment reflects either
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  the traditional midterm penalty, meaning people don't really pay
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  a whole lot of attention to it, versus factors
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  that are unique to this year.
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  And obviously
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  talking about what's going on economically, geopolitically.
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  How do you feel about what's coming up in November
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  and the importance of this midterm election?
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  Well, first of all, thank you, Anthony, for for having me on.
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  You know, we've
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  we've been sort of stuck in a cycle, of wave elections.
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  Right.
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  So,
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  we've seen some pretty turbulent
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  midterm elections and in recent history,
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  we have we have an electorate that is very uneasy in general,
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  and tends to, intends to take that out on the party
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  that's in control.
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  So, as you know, as
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  we think about November,
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  we obviously have a host of issues
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  that are top of mind for voters.
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  But overwhelmingly,
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  you know, right now
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  it's inflation, the economy, obviously, the war in Iran,
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  is front of mind and has has economic ramifications as well.
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  I would say, though,
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  you know, the one thing
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  that kind of stands out in polling right now,
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  and as I mentioned before, is that inflation is number one.
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  But when you ask voters,
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  where do they think Congress is prioritizing issues,
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  inflation in the economy rank actually rank number five.
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  Right.
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  So there's a misalignment in terms of what voters think is top of
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  mind versus what the policymakers,
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  are putting, at the top of their agenda.
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  And so I think as we think about the, the,
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  you know, the, the next three months,
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  ahead of the midterm elections, you know, there's
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  a few data points
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  that obviously everyone is keeping a close eye on.
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  And that is,
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  you know, number one,
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  where is the president's job approval rating at right now?
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  He's in the high 30s.
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  If you go back in history.
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  That's kind of right
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  where George W Bush was at this moment in 2006, before
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  what was a very difficult midterm election for Republicans.
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  The other the other, you know, I would say two dynamics that,
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  that I keep a close eye on are, the enthusiasm.
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  Right. Who's more excited to go vote?
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  That obviously matters
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  a lot in a midterm in particular, because, voter turnout,
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  tends to be, you know, north of 20% lower than it is
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  in a presidential cycle.
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  And so getting your vote out, is all the more difficult
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  in a midterm.
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  And right now, with the polling suggests that Democrats
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  have a pretty wide margin when it comes to enthusiasm.
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  So a recent poll had their enthusiasm advantage at 18 points,
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  meaning they're they're that more excited to go vote.
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  That's the widest spread,
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  that that has been seen in polling dating back to 2010.
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  Of course, which was a historic midterm
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  election for Republicans, which netted them 63
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  seats in the House.
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  Did not net then the Senate, by the way,
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  and this this cycle could be a parallel to that.
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  And then the final thing I would point out, which,
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  maybe doesn't get enough attention, but is a really important
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  element of the electorate,
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  and that is what is referred to as the double haters.
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  So the voters who don't like either party, right.
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  Who have kind of soured on both.
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  What are they going to do if they do show up to vote in November?
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  Right now, Democrats have a north of 20 point lead
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  among that segment
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  that are just angry about the current, dynamics,
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  whether that's in Washington or their local community.
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  To put that in contrast, if you look back to 2024,
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  President Trump and Republicans won the double haters,
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  by double digits and did very well
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  with those that were just angry with the current environment,
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  in the US.
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  And so I would say those are three,
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  you know, key elements to keep an eye on.
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  And in terms
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  of where they end up,
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  progressing over the next three months or so.
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  Yeah. Joe.
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  And so I, you know, thank you for giving us the rundown.
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  And just to give our audience
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  a reminder of the base
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  case here in CIO, our chief investment office does believe that,
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  the, Democrats are expected to take the House.
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  The Senate's a little bit of a close call.
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  Although they're maybe leaning towards
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  Republicans keeping the Senate, so.
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  But but obviously there's
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  a little bit of a runway
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  to go in the next few weeks before the election.
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  And obviously, as you said,
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  we have to see who's going to turn out to vote.
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  So let me ask you,
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  because this is really where the rubber meets the road.
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  If you're looking at Senate races and different House districts
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  that are going to determine the control of Congress, which areas
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  are you seeing that are going to be key
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  suburban and maybe even swing seat battlegrounds?
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  We always talk about battlegrounds in these elections.
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  And so what are your thoughts there?
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  What are you going to be looking out for?
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  Well, I would say one state in particular that,
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  that I would keep a close eye on that is, is probably,
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  you know, if you want to predict what might be the tipping point
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  for control of the Senate and also,
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  you know, a good indicator on the House is Iowa.
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  So Iowa has two very competitive U.S.
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  House districts.
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  Both are suburban seats, seats that Trump won, albeit narrowly.
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  And then in Iowa, you also have a very competitive governor's
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  race and Senate race.
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  So in Iowa is a state that Trump won
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  by, I believe, right around 13 points, two years ago,
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  but is a state that is increasingly competitive this cycle.
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  So for Democrats, they've got,
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  a very talented candidate at
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  the gubernatorial level
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  named Rob Sand, who's a state auditor in the state.
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  He's the he's been the only statewide
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  elected Democratic candidate, in Iowa,
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  for for the better part of the last eight years.
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  And he,
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  he is gaining a lot of national notoriety
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  as kind of a rising star in the Democratic Party.
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  He consistently is ahead in the polls.
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  So it looks like he will win down ballot in the Senate race.
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  You have, Ashley Hinson, who's a sitting
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  Republican member of Congress, facing off against Josh Turek,
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  who is a former Paralympic athlete,
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  basketball player.
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  Former President Obama just cut an ad for him.
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  He's got quite the personal story.
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  He's also a state senator.
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  But Democrats have,
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  I would say, a uniquely powerful ticket in Iowa.
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  And if they're able to pull off a sweep in Iowa, that's
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  probably a signal that they will control the Senate.
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  So if you want to watch one state on election night, the Hawkeye
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  State, is one that I would I would keep an eye on.
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  Yeah, I think I I'll be certainly doing that.
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  I think everybody else will as well Joe.
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  So let's, let's kind of go with the, with the scenario.
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  So if either party outperforms expectations and in this scenario
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  where maybe looking at Democrats taking control or at least,
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  you know, maybe providing control in the, in the, in the House,
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  talk about how that might reshape the policy
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  agenda for the final two years of the presidential term.
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  Because if if, you know, we have divided Congress,
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  it's, you know, potentially gridlock, obviously, if,
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  if maybe if Democrats take both sides of the House of Congress
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  and they're both controlling both sides,
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  that could really put a bit of a hindrance
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  against the presidential agenda.
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  So where do you see that if, depending on what your outlook is
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  and what you expect to happen on election night,
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  where does that sit as far as policy agenda goes?
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  Yeah.
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  So I mean,
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  if you're if the base case is that at the very least, Democrats
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  likely win the House, that means, you know,
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  gridlock is is going to be an overwhelming theme
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  for the next two years, right?
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  There will be, a heavy dose of oversight.
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  Is there always ways when a party, you know, when the,
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  the ad the the party in the minority takes control and,
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  you know, conducts
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  a variety of investigations into the sitting administration.
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  So we'll see a lot of investigatory work on, on the side of,
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  I think the Democratic majority in the House, in terms of,
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  you know, the legislative element,
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  I think, you know, it's largely going to be,
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  you know, keeping the lights on.
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  They have to fund the government.
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  They have to do the basics.
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  I wouldn't expect a whole lot more than that.
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  If the Senate flips, in addition to the House.
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  Right, that that adds a whole other layer.
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  And what I
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  mean by that is, you know,
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  suddenly if Democrats control the Senate, that means no longer
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  can the president dictate who is nominated for judicial seats.
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  So, you know, we always think about the Supreme Court, right?
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  You have an aging court.
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  I think there was a wide perception that,
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  you know, you would have 1
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  to 2 of the Republican appointed justices step down.
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  Just given their age and to guarantee
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  that they would be succeeded by, another conservative jurist.
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  However, none of them ever retired so far.
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  And over the last two years.
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  So if there were to be a vacancy on the court,
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  say it's Justice Thomas, Justice Alito, Chief Justice
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  Roberts, who are all in their 70s.
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  That would mean the Democrats could either block his appointment
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  or have a heavy hand in terms of who he appoints.
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  Similarly for regulatory posts.
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  No longer can the president nominate kind of whoever he wants.
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  For whether it's a regulatory such as the SEC, CFTC,
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  the alphabet soup
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  that that obviously the financial world was under
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  or for or even for his cabinet.
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  Right.
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  So that that introduces a layer of,
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  a further gridlock that could hinder the administration's
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  ability, to execute on its agenda.
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  I would say, what we've seen over the last several years,
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  and this really dates back to the the Obama era is that,
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  you know, presidents in the in the sort of post,
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  you know, even 2006, the, the end of the Bush administration
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  have really leaned on their regulatory executive powers
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  to execute a broad swath of their agenda.
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  And I would say
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  every president since has tried to kind of move
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  the needle as much as they can inside of the legal scope.
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  And so, so much of what, you know, President
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  Trump has done is through executive action.
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  So he still has that at his disposal.
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  But,
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  it's going to come with a lot
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  more oversight from the congressional, side of the equation,
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  whether it's one chamber
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  or or both chambers, depending on the election outcome.
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  Right.
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  And I guess sort of the the question that everybody really
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  wants to know, especially watching this particular program,
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  is, you know, given that there may be some difficult negotiations
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  when it comes to fiscal policy or trade,
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  you know, regulatory priorities in perhaps shutdown risk,
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  how should investors be thinking about
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  planning their portfolios in and or around
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  these midterm elections
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  and what could potentially come over the next two years?
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  Well, I would say the
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  the sort of headline risk element is,
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  you know, I think if, if both chambers
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  were to flip, right,
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  that just adds another layer of difficulty,
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  I think in terms of the
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  of probably the government operating more efficiently.
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  I think when you have when you have a split government
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  between the House and the Senate, it tends to operate,
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  a bit more efficiently. And,
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  my, my sense is a,
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  an across
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  the board sweep for Democrats would probably lead to more,
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  you know, more
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  risk of gridlock and more risk of a government shutdown,
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  you know, on the regulatory and trade side,
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  so much of that is dictated by the administration.
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  So I don't think there's a lot of risk there.
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  I think, government shutdowns,
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  I don't pretend to be an economist, but,
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  you know, we've obviously been through several now.
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  And so I think to some respects, the market has sort of grown
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  accustomed to that is, which is not necessarily a good thing, but
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  but I think there's, you know, there's a real risk
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  of that type of behavior in an environment,
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  you know, that, you know, that
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  likely is going to unfold over the next two years.
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  Right?
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  Yeah.
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  It's it's funny
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  how we even and funny not funny, but that we've got,
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  we've gotten a little bit used to,
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  these shutdowns and sort of this gridlock
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  that potentially happens.
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  And so we become numb to these changes
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  until they start affecting everybody's daily lives.
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  And obviously the workers
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  that are not getting paid during the shutdown.
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  So lots there to, to think about as we move forward.
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  But Joe, thanks very much.
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  Always good to see you and thanks for joining me on the show.
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  Great to have you.
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  Thank you Anthony.
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  Thank you Joe.
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  And again that was Joe Wall from BlackRock.
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  And thank you all
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  for joining us
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  on this next edition of The Road to the Midterm Election Series.
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  We'll have
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  a few more episodes coming out between now and November,
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  and even right
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  after those midterm elections will have a postmortem CIO
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  live for you.
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  So make sure to check your calendars for that.
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  And as always, we want you to check out more information
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  on the elections
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  and everything coming out of our chief investment office.
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  You can follow us there at ubs.com/electionwatch.
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  Plus, we have a lot more going on on the podcast and video side.
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  You can follow us there at ubs.com/views.
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  That's our insights website.
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  Thanks for joining us.
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  Everybody from New York City I'm Anthony Pastore.
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  We'll see you next time. Thank you.