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UBS Road to the Midterm Elections: What comes next for Washington? · UBS Trending

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Hello everyone, and
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welcome to UBS Studios award winning series, Road
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to the Election.
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This time around,
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with a focus on the upcoming midterm elections, here in the U.S..
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I'm Anthony Pastore.
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Thank you all for joining me once again.
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As we discuss what matters most at the intersection of policy
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and markets,
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my guests for this episode,
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and I'm very excited to have them both here with me.
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UBS America's Advisory Council members, Admiral Jonathan Greenert,
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he is a retired four star admiral and the former Chief
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of Naval Operations, Department of the Navy, and our very own
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John Savercool, who is the former head of Governmental Affairs, U.S.
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here at UBS. Gentlemen, really nice to have you.
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Thank you for sitting with me.
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And thank you for providing all your insights
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that you're about to do for our audience.
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A great talk about having a real room of experts here.
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John, you've been working in Washington, DC on the Hill
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for so many years.
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And Admiral, of course, with your, decorated, service.
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Thank you for your service to our country.
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Great to have you both here.
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So, obviously,
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this is, we're looking at midterm elections coming up.
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We're recording this on Tuesday, October 27th.
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Just for our audience is sake.
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So we've got a week from
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tomorrow is
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when people are going
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to be going to the polls that haven't
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already gone for early voting, which we'll talk.
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I want to ask you both about that in a moment.
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But John, just to level set here, our chief investment office
1:27
through their Election
1:28
Watch publication, has updated their predictions
1:31
or probabilities for the results of the midterms.
1:34
Now it's looking like either a 40% probability
1:37
of a divided house.
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Which would mean that the Democrats would take
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the House and Republicans would keep the Senate,
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or even a 50% probability of a Democratic sweep.
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And that was updated up just about three weeks ago.
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What are you thinking as you look at the list of names
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and the men and women
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who are running in this election or rerunning,
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what do you think will happen as we get the results next week?
2:02
Well, Anthony,
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thanks for having me and Jon on the program.
2:07
I think the, the,
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the biggest barometer
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to determining what might happen in a midterm
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is the president's popularity,
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the sitting president's popularity.
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Right now, the president's approval rating is about 36%.
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That's very, very low.
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It's the lowest of his presidency.
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It's low enough that it would be easy to conclude that
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Democrats will have a big time in this election cycle.
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I think they will clearly win the House of Representatives.
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I think they'll pick up about 25 seats.
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That will give them a comfortable majority to, to act on in 2027.
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The Senate is different.
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The Senate consists of a number of individual races
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that all have their own dynamics,
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all have their own personalities, doesn't quite follow
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the cookie cutter model that the House does.
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So I think that the Senate is going
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to be much more up in the air from now until Election Day.
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I have a suspicion that Republicans
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will retain control of the Senate.
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I just think some of the candidates that they are offering
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that Democrats are offering in some states are such
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that Republicans will do a little better in the Senate elections
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than they do in the House election.
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So I think you could see Republicans
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hold on to their majority by a very narrow amount.
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You know, they have 53 right now.
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They could go down to 50 or 51 if it's 50.
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The majority is stays with the president,
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with the president's party.
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So that could happen.
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If it is if Democrats win,
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which they could, if Democrats win by one seat,
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you'll see a massive full court effort
3:55
to try to get John Fetterman to switch parties.
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And that would switch it back to Republicans.
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So there's a lot of dynamics in play.
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The majority,
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the level of the majority really matters a lot.
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But my hunch is that Republicans
4:12
probably have enough wins in them that they'll retain a majority,
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maybe by a 51, 49 margin, something like that.
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Although that's a little bit of a contrarian view.
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Yeah.
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Compared to others. Yeah.
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Tough to know, obviously.
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And, you know, as like we said, it's a 40%, 40%
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divided Congress probability from CIO and 50 for Dems sweep.
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But let's go with the scenario
4:33
that you're painting here because it looks like,
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yes, those Senate
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seats that are open are in tough battleground states
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that usually lean more to the Republicans historically.
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If that is the case and we get a divided Congress,
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what does that actually look like?
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What are the implications of that
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when it comes to policy
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or getting things done in Washington for the next two years?
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Well, in any divided government
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scenario, it's hard to imagine much getting accomplished.
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And in this environment, it's even much tougher to envision that.
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So my sense is that
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the House will use this majority to pass bills
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and address issues that are symbolically important
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to the Democratic Party and the Democratic voters,
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and they will use this as a basis
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for building a record for 2028.
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They want to start building a platform for whoever the
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nominee is in 2028.
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And they'll
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begin to pass legislation addressing
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affordability, health care, domestic issues
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that are very important to the Democratic Party and its voters.
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So I think you'll see that focus.
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You'll see a similar focus on the president himself.
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Remember, Democrats will have the ability
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to control the committees and chair the committees.
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So oversight of the president
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of his family, of his actions,
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checking the legality of certain things,
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trying to put a spotlight on things
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that Democrats think are corrupt or just not.
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Right.
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Those things will be central in the Democratic playbook
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next year, all with an effort toward
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determining whether there's a basis for an impeachment.
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There's a lot of people in the party that want to pursue
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an impeachment.
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They think it might lie with the president's family
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and their earnings, throughout this presidency.
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So I think it'll be,
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you'll see a focus on the Democrats of
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setting up a policy agenda that they can use for 2028
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and investigating the president to embarrass him to,
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to kind of put him in his place,
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per their thinking.
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Even if Republicans have control of the Senate
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or if Democrats have control, it's still a divided Washington.
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Maybe Congress won't be divided, but, it's a divided Washington.
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So any bills that Democrats passed that Trump doesn't like,
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he will simply veto. Right.
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And there's not going to be a strong enough effort
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to overturn those issues.
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So we're going to see a situation where not
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a lot of legislation is passed.
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Most of the activity that the media will be
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focused on will be on the investigations
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and on what Trump does as an executive.
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And Trump
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still has significant power to conduct foreign policy, trade,
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regulatory policy, things like that.
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So he still has a lot he can and will do.
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And, I just think we'll see
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Trump working on the executive actions.
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The Congress working on its issues.
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But there will be no collaboration
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and everything will be geared toward,
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how will impact the 2028 presidential election.
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Right.
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And hold that thought, John,
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because of course, I'm going to ask you
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what you think about that.
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How could I not? And you're sitting next to me.
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It's interesting. Details. Yeah.
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That's right, that's right.
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And it's interesting too, because,
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you know,
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I've done a lot of coverage over the years through UBS
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and my other firms
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and you as well, both of you on midterm elections.
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This one really is getting a lot of attention.
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People are really galvanized. They want to go vote.
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And just as a stat that just to kind of keep it honest here,
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as of today, there's been 32 million early or mail in votes cast.
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And that's at this point in the past 2018 and 2022
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midterms, it's
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a higher percentage of people who have shown up at this point.
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So people are wanting to go out there.
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Politics aside, it's
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just a matter of people
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actually wanting to get there and vote early.
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You know, we're getting to a point where Election Day
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is no longer truly Election Day, right?
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It'll be the last day that you can vote.
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So it's kind of the last chance to vote.
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And increasingly, I think that trend of people voting early,
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you know,
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we'll see that continue over the next decade or two.
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Right. Exactly.
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And make sure you check your polling locations
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because they're usually different early versus actual voting day,
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especially here in New York.
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So Admiral Greenert great too.
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By the way, thank you for being here. Good to have you.
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So let's go on the scenario.
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If the Democrats win both the House and the Senate, just to,
9:02
you know,
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looking at that as a potential, situation that will take place,
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what policies do you think can get enacted?
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Could we still have the federal budget on the docket?
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There's other things that are waiting, awaiting action.
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Sure.
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By our by our politicians and, local representatives.
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What's the what's that look like to you?
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If the Dems do win?
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I think the biggest issue for them to deal with,
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especially if they win
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both houses, is
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get the federal budget laid out as quickly as possible.
9:31
We are so, it's so dynamic right now.
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It's unstable.
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If we don't have a 2027 budget and 2028 is important.
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And I'll get to that in just a minute. Why?
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A whole host of reasons.
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But number one, people are unhappy.
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Prices going up.
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We need an act of, if you will, stability and action.
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And a federal
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Budget would be a good way to go.
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Number two would be, nominations
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and confirmations in the Senate and an active Senate.
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Getting that done would be very, very good thing as well.
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Number three, I would say back to the federal budget.
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There are so many issues, so many investments
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that this administration
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got private investors to get involved in.
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You put billions in, will put billions in.
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A lot of it had to do with security, munitions,
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companies like Palantir and Anduril and others.
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AI, and we're going to be able to help you with data centers.
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Well, there are a lot of companies who have invested privately,
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and they're on the hook for a debt.
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Where is the federal government?
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Well, we don't have a budget yet,
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and therefore
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you can't authorize inappropriate
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even with a continuing resolution, you can't do that.
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So we desperately need a budget to get those going.
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So this needs it as well.
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I think that's very important.
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Next would be get this war resolved.
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If not,
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if they say,
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you know,
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they say we'll get out of Iran and all that goes with that.
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Easier said than done, but perhaps a stable situation.
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It's perhaps reasonable now, but make it more permanent.
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You know what is our presence going to be?
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What's the where are we with the Gulf States?
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Get that stable.
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And I think,
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things can go on
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and we can start rebuilding
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and if you will, not just the economy,
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but bring those prices down from fuel to food to everything
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associated with it. Right.
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And affordability is really on the docket this time around.
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It seems like a lot of voters,
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when they're, you know, doing their sort of exit polls,
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they're talking about
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that being the one of the main reasons
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why they showed up to vote early because of affordability,
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housing, gas prices, as you mentioned, Admiral.
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You know, and let's stick with the what's going on,
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internationally because midterms do generally tend
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to be domestically focused.
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But obviously, besides affordability here on the ground
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in the United States,
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there is this Iran conflict have been going on.
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There's continued strains between Russia and Ukraine.
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I mean, they're continually attacking each other.
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There's so much potentially on the horizon geopolitically,
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how much of that,
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you know, is important
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when you think voters are pulling the lever?
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And what could the implications be going back to what you were
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indicating before, if there whether it's a divided
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Congress or a Democratic sweep?
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Yeah.
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Usually a foreign policy is good and running.
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Well.
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The general public doesn't know much about it
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because people are doing their job and that's what they're that's
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why how it was designed to be on the other hand, it's not.
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And so in the eyes of the general public,
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the last time we had something I think this blatant was 20 years
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ago, 2006 things not going well in the Iraq war.
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We had a lot of problems
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with Abu Ghraib and a whole host of things there.
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We wanted to get out.
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So we had a very unpopular secretary of defense Rumsfeld
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at that time,
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and the Bush administration was seriously struggling
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to describe it.
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And a lot of the American public
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said we were misled from the very beginning.
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Where are these no weapons of mass destruction?
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You remember that fast forward 20 years.
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It's, the what we have here now, though, is what you said.
13:00
We have high gas prices.
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We have food prices.
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It's hard to do. Everything has gone up.
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And the Iran war, which some said,
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you know, that's a war of choice.
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We didn't have to do that. People point to that.
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So this foreign policy, which got us there
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and then we tried to blame the diesel prices on Ukraine
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that didn't work.
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And it's just not working.
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So it's in it's obviously in front of people
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and it's become a big issue on it.
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The result I think, would be, as I said before, and action
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by the Congress to stop all of this.
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John mentioned an impeachment in 2006.
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Somebody had to go a cabinet member high enough.
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It turned out to be Rumsfeld.
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They brought gates in.
13:42
Things calmed down the strategy and the policy.
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Hegseth could be on the table as me.
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I mean, there's going to be a sacrificial lamb.
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One has to be there.
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If we act historically and it I would presume it would be him.
13:55
There's already an impeachment started in the House,
13:58
so we'll see where it goes.
13:59
But, unusual, but it's there and I think it's
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connected to we've entered into the pocketbook.
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And that's not a good place to be.
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That's where it always goes.
14:07
But they always say, what is it?
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It's about the economy, stupid.
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That famous, was that James Carville?
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Right, right.
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And it's always about how much is coming in
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and how much is going out of every household.
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And obviously,
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we know things are more expensive than they were a year ago
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because of a lot of things that are going on.
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Thank you, Admiral.
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That's great.
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And by the way, just to kind of level set with you when you think
14:29
about trying
14:29
to get out of this conflict in Iran
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and you've been in these situations, I know it's
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not something like, we can't just flip a switch, it's all over.
14:37
It's going to take time for us to figure out, yes,
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how to get out of this. Yes.
14:41
Yeah, I agree we have right now we have a blockade going on.
14:44
It's pretty effective.
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And it is it is squeezing Iran.
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So something that enables us to get a coalition involved.
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What an idea, right.
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Yeah.
14:53
Such that we're not the ones running this blockade.
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And then that could come down to a patrol perhaps, a deal.
15:00
They strike a deal with Iran that is acceptable to them.
15:03
The GCC, Israel.
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Remember, they have election today.
15:07
So we'll see where that goes and it'll play into it.
15:09
I think something that calms down our deployment are,
15:13
I feel a burden on the military and the Department
15:16
of War/Defense and what that means to it.
15:19
So that has to get down to a stability or that'll be a continuing
15:23
budget issue.
15:24
You know that the American people just don't want to tolerate.
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They will not tolerate it. Right. Exactly.
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Thank you.
15:29
Admiral. John,
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before I let you go and Admiral, feel free to jump in
15:33
if you have any thoughts on this.
15:34
I want to go back to potentially what 2028 could look like.
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It's obviously very early, but we were just talking before
15:42
we started these election cycles are pretty consistent.
15:47
It's like once one
15:48
election's over, the next day, we're on to
15:50
whatever the next one coming up is.
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So I wouldn't be surprised
15:53
if in the next couple of months,
15:54
we start to hear more about candidates running for 2028.
15:57
Who do you think? Is there anybody in particular?
15:59
And it's not a name.
16:00
Kind of give me a sense of who you're thinking.
16:02
It's going to be someone that we know,
16:04
somebody that comes out of the woodwork and we say,
16:06
who is this person?
16:07
What are your thoughts on potential presidential candidates?
16:10
It will be it will involve all of the above.
16:14
This is an open presidential year.
16:16
So anyone who wants to run,
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including people we've never
16:20
heard of or who we would dismisses crazy.
16:24
Will consider running and
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we will see those kind of people on the ballot.
16:29
My sense is that on the Democrat, on the Republican side,
16:33
it all depends on who President Trump endorses.
16:36
If he endorses JD Vance,
16:39
then Marco Rubio will stand down and not run.
16:43
You may get some other people
16:44
running like Senator Ted Cruz may run.
16:47
You may get Nikki Haley back in the race.
16:49
There has to be a moderate faction that,
16:52
that puts forward a candidate.
16:55
So I think it'll be a more,
16:58
a quieter race on the Republican side, but it will be Vance,
17:02
I believe.
17:03
I think Trump will eventually endorse him.
17:06
Won't do it soon, but we'll do it later.
17:09
You know, probably late next year.
17:11
You could see him make an endorsement.
17:13
I'd be surprised if it wasn't Vance.
17:15
And that person will be the front runner.
17:17
On the Republican side.
17:19
Just, by virtue of having Trump's endorsement
17:23
on the Democratic side, you know, you'll see one of these,
17:28
one of these
17:29
one of these seasons where there would be 15 candidates running.
17:33
And I think we remember the debates of the last couple
17:36
of primary races where the debate table
17:39
just keeps stretches and stretches
17:41
and the camera can't cover every stage.
17:43
And you a very wide shot in those. Right.
17:46
And I think they even had multiple nights where people came.
17:49
And you know, that's hard for candidates
17:52
when there's so many people in the race.
17:55
My guess is you have 15
17:56
or so people running their people right now
17:59
right this minute thinking about how they're going to do it.
18:03
A lot of these people who aren't as well
18:07
known will announce an earlier candidacy.
18:10
So in January, February they'll begin to announce
18:14
their candidacies.
18:16
I look back earlier at
18:18
when people were announcing in a contested primary
18:21
and it generally begins in mid-January,
18:24
and it will go through the end of the first quarter
18:26
and end of the second quarter.
18:27
So that's when you get the majority of your announcements.
18:32
At first it will be the lesser known people,
18:34
and then you'll start to hear
18:35
about some more of the more familiar names.
18:38
I don't think there's a front runner
18:39
on the Democratic side right now,
18:42
but I do think that all the energy is
18:44
on the side of the democratic socialist
18:47
wing of the party, much like it's with MAGA
18:50
on the Republican side.
18:51
So the extremes have
18:54
all the energy in both parties.
18:56
The moderates are seeking a place to reside,
19:00
and they don't know where it's going to be.
19:01
But I'm not optimistic that you'll see those moderate
19:04
factions emerge with wins
19:07
In 2028, I think it'll be a battle between
19:11
a Maga person and a social Democrat who proudly carries that.
19:15
Label right there.
19:16
It's far away from each other as possible in their own corners.
19:19
I mean, there's a million names that are popping in my head Josh
19:22
Shapiro, AOC, Gavin Newsom, Pete Buttigieg.
19:25
I mean, you can go and list ten more right away to.
19:27
Write so many names, and they're good reasons why
19:30
they'll be competitive and why they won't be competitive.
19:33
And we'll just have to see how it goes.
19:35
But I think all those people want to run will consider running.
19:39
But there are some who will not run
19:42
just because they smartly see it as not in the cards.
19:45
Got it.
19:46
And I think that will include,
19:49
Josh Shapiro and a couple other people.
19:51
Maybe Kamala Harris will decide not to run.
19:53
I think she wants to run, but whether she'll decide to run,
19:57
you know, I just don't know.
19:59
I mean, she may sense that so much of the energy
20:01
is with another faction of the party that she may back off.
20:05
Yeah.
20:06
May I make a point?
20:06
So, first of all, let's look at Vice President for a minute.
20:10
He is he has to figure out how he's going to explain.
20:13
You were part of all this war we're in.
20:15
You're part of the rising gas prices, all of that, the economy.
20:20
So he's going to have to walk his way through that narrative.
20:22
So let's just take right now we have three
20:25
aircraft carriers in Central Command.
20:28
And you see in the news the president is considering
20:31
striking again.
20:33
We'll see what happens with Israel's elections.
20:35
And even if Netanyahu doesn't win, he may win.
20:37
You know,
20:37
he may still have some power as we know all that issue, if,
20:41
heaven forbid, we go back in and do another strike
20:44
and it doesn't go well,
20:46
how does how does Vice President get out of that?
20:49
If he runs again, he wears both.
20:52
That's a hair shirt
20:54
that, you know, I don't want having to do with this.
20:57
He'll always be tied to those decisions that are being made.
20:59
He might have to say something
21:01
right there off the bat and go off the party line.
21:04
Right.
21:04
Well, but what happens if we win the war?
21:07
What happens if we if the war makes a turn
21:11
that is more favorable than it is.
21:12
Whole other matter. It's a whole other matter.
21:15
Yeah. Yeah.
21:15
So I'm not dismissing, I wouldn't dismiss the possibility
21:20
that we could pull out of Iran
21:21
in better shape than we sit right now.
21:24
But I think if we exit,
21:28
on
21:29
unfavorable terms, then clearly he has a lot of explaining to do.
21:32
He's already,
21:33
you know, he said that he would
21:34
he might do things differently,
21:36
but yeah, that'll be a big anchor around his neck.
21:38
Many say a strike again is a higher stakes gamble
21:42
now that the midterms are over for this president.
21:45
That's all I'm saying.
21:46
And if it doesn't go well,
21:48
which there's more likelihood it won't, then will
21:51
they say then the vice president wears that, as does Rubio.
21:55
And I don't know how they talk their way out of it.
21:56
I presume they're thinking that too.
21:58
Yeah, yeah,
21:59
I'm sure they're putting a team together
22:00
as you speak to figure out how to narrate that. Yeah.
22:03
Anyway, thanks, gentlemen. I wish we had more time.
22:05
This is a terrific conversation.
22:06
I wish we could do another half hour with you,
22:09
but I really appreciate you taking time to chat with you today.
22:12
Good to see you, both. John Savercool. Admiral Greenert.
22:14
Thanks. Pleasure.
22:15
Get out there and vote, everybody.
22:16
And don't forget
22:17
that we are going to have a lot more content
22:19
on the midterm elections in the next few days.
22:21
We've got a live stream coming up on Monday, November
22:25
2nd at 4 p.m. Eastern time, right here from the studio.
22:27
I'll be hosting
22:28
Libby Cantrill from Pimco and our own Kurt Reiman from CIO.
22:32
As everybody heads to the polls.
22:33
That has an early voting.
22:34
And then we've also got a post election
22:36
coverage on the CIO regularly scheduled live stream.
22:40
That's Thursday, November 5th at 1 p.m.
22:43
Eastern time.
22:43
Hopefully by then we will have results
22:45
and we can talk more about that.
22:47
Plus, we've got a lot more content coming out of the firm UBS,
22:50
as well as our own chief investment office, podcast and videos.
22:54
You can find those at ubs.com/views.
22:57
Thanks for joining us.
22:58
Everybody.
22:58
Get out there and vote from New York City I'm Anthony Pastore.
23:01
We'll see you next time. Thanks.