Articles

Investors Are Among Those Closely Watching Midterm Elections

Shareholder Advocate Fall 2018

October 18, 2018

By David M. Maser

With bipartisan politics virtually nonexistent, the upcoming midterm elections could have an outsized impact on federal policy, not only for the hot-button issues that have dominated the headlines since President Trump took office, but also in areas like investor protection.

Whether or not that happens depends on whether Republicans maintain control of both the House of Representatives and the Senate, or cede one or both of their majorities to the Democrats. All 435 members of the House are subject to elections, as they are every two years. For the Democrats to take back the House, they would need to add 25 new seats to their current 193. For the 100-member Senate to change hands, the Democrats would have to pick up two of the 35 seats up for election to gain a majority (if they win only one seat, the Senate would be tied 50-50, with Vice President Pence breaking any deadlock). To secure additional seats, Democrats are keenly focused on potential pickup opportunities in Arizona, Nevada and Tennessee, while the Republicans are looking to flip seats in Florida, Missouri, Montana, North Dakota and Indiana.

As of October 1, the Realclearpolitics.com “poll of polls” gives Democrats a 7.4% advantage in the generic Congressional ballot, which along with historical trends would indicate the Democrats have a good chance of winning control of the House. On September 27, Kyle Kondik, Managing Editor of Larry J. Sabato’s Crystal Ball of the University of Virginia’s Center for Politics said, “Our best guess right now is a Democratic House gain of somewhere in the low-to-mid 30s. But there are enough very close races that something like a 30-seat gain could turn into more like a 20-seat gain and leave the Democrats short of a majority. Back in July, we said the Democrats were ’soft favorites‘ to win the House. Their odds have likely gotten better since then, or at the very least have not gotten worse, but the GOP still has an opportunity to retain the House with some breaks.”

As for the Senate, most pundits think it will likely stay within a vote or two on either side, especially given the particular seats up for election, with Democrats needing to defend 26, including some in states where President Trump is very popular, and Republicans defending only nine, all but a handful considered relatively safe. Charlie Cook, Founder of The Cook Political Report, said on September 23 that: “What we are dealing with this year is actually very simple: there is a blue wave and a red sea wall. This election all turns on whether the blue wave rises above the Republican sea wall.” From Cook’s perspective, the sea wall has been created by the Republican institutional advantages from the 2010 redistricting effort and the fact Republican voters are more evenly spread out, whereas Democratic voters are clustered generally on the coasts and specifically in large cities.

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