Another factor has been dissatisfaction with incumbent leaders. Younger voters generally lean Democrat and helped reclaim the House in 2018. One factor for the uptrend is young voters. More recently, turnout has trended upward. Low turnout is typically attributed to political disengagement and the view that voting will do little to change policy. In recent decades, about 60% of eligible voters voted in presidential elections and 40% voted in midterms. Sources: Gallup and Wells Fargo Investment Institute, July 8, 2022. Not surprisingly, according to Gallup, the top issue for voters today is the economy - 85% of likely voters say the economy is an “extremely or very important” issue. In 2006, Democrats picked up 31 seats in 2010, Republicans gained 64 seats and in 2018, Democrats gained 40 seats. But that number has been higher in recent midterm years when the White House and Congress were controlled by a single party. Since 1974, the president’s party has lost, on average, 23 congressional seats in the midterms. The House currently has 220 Democrats, 209 Republicans, and 6 vacancies. The Senate currently has 48 Democrats, 2 independents, and 50 Republicans. In November, 469 seats in Congress are up for regular election - 34 in the Senate and all 435 in the House. Nevertheless, some basic contours of the midterm elections are worth remembering. But presidential action also has been increasingly likely to face judicial challenges in recent years. If the pace continues, the number of orders issued by President Biden by year-end could exceed those issued by Presidents Trump and Obama in their first two years in office at 92 and 74, respectively. President Biden has issued 92 executive orders to date and may continue to do so. Moreover, we believe presidential action is unlikely to move policy into first place as a market mover. We expect that the strong prospect for divided government and the trend toward a weak economy and earnings will leave the economy to drive asset prices into year-end. Second, and more important, even if Congress could find consensus on economic support, the economy’s strong negative momentum is likely to resist fiscal policy remedies. First, divided government traditionally has hampered legislative actions, meaning that government policy on taxing and spending is unlikely to move markets in the coming Congress. Whether a single party controls both chambers or one, we see two reasons why the midterm election results may rank lower than the economy as market movers in the coming months. Turnout historically has been lower in midterm elections than in presidential elections, but Gallup found that 50% are more enthusiastic than usual about voting this year. Voter turnout is invariably key to watch but could be more difficult than usual to predict this year. Considering the heightened divisions - between and even within the two parties - markets will be watching whether the Republicans can retake the House and, if so, with a large enough majority to overcome internal factions.Īs for the Senate, we expect that markets will be watching key races in Georgia, Pennsylvania, and Arizona. With slim majorities in both chambers of Congress, a wide variety of national polls predict that Republicans will retake the House. Midterm elections generally play out as a referendum on incumbent leadership, but other factors are in play and will likely attract investor attention this year. National implications of the midterm elections
Midterm elections 2022 predictions driver#
We believe divided government coupled with a weak economy and earnings will leave the economy as the main driver of asset prices.Our base case for the midterms is for split government.Midterms are generally viewed as a referendum on incumbent leadership.We believe voter dissatisfaction about sticky inflation and a slowing economy is likely to register against the majority party in November. The midterms are generally viewed as a referendum on incumbent leadership. By Michael Taylor, CFA, Investment Strategy Analyst
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