Page 6 - ISQ UK_October 2017

INVESTMENT STRATEGY QUARTERLY

Elephant in the Room?

Ed Mills, Washington Policy Analyst, Equity Research, surveys the current political landscape and
the upcoming midterm election.

We are in the final stretch of the midterm elections that In the House of Representatives,
we view as a proxy in the fight between President Trump’s “We view Democrats as “R” no longer stands for
It
stands
for
“Republican.”
agenda and the electability of Congressional Democrats. favored to win a majority of “retirement.” House Republicans
seats in the House of
Multiple themes will be given considerable attention in Representatives and have more retirements and open
the coming months. In terms of the potential electoral Republicans favored to seats since at least 1930. Polling is
maintain control of the notoriously sparse in House races,
outcomes, we will be paying particular attention to the
Senate.” but traditional proxies (such as
political environment vs. the electoral map. Adding to the Presidential job approval, generic
uncertainty of the outcome and potential market volatility ballot test and voter enthusiasm)
will be vigorous debates about polling – with questions of all point to significant gains for Democrats, giving them the edge
in the fight for a House majority.
its quality (especially in House races), accuracy, and Historical midterm results and an array of surprising Democratic
predictability. special election victories including Alabama (Doug Jones) and
Pennsylvania (Conor Lamb) strengthen the case that Democrats are
CURRENT VIEW favored to retake the House.
The political winds are at the Democrats’ backs, but the Democrats need to net two seats for a Senate majority after
distribution of Senate races, the partisan tilt of many House November’s election. In our analysis of these races, we see 11
districts, and positive economic indicators could limit Republican competitive races in seats currently held by Democrats and only
losses. That said, we view Democrats as favored to win a majority four in seats held by Republicans. Wave elections (an election in
of seats in the House of Representatives and Republicans favored which a party makes major gains) can swing these competitive
to maintain control of the Senate. By historical standards an seats in one direction, but Democrats face an uphill battle to
average midterm election would produce a Democratic majority retake the Senate.
in the House.

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