Page 17 - ISQ UK JANUARY 2020

JANUARY 2020

“ Democrats will first need to choose a nominee, which
could lead to increased volatility in the first half of 2020. ”

In the House, Democrats built a solid majority in the 2018 That said, Biden is still leading in many national polls and has
midterm elections and Republicans would need to net 20 seats little incentive to exit.
for the House to flip. Recent Republican retirements point to
more potential pickup opportunities for Democrats, a The entrance of two new moderate-leaning candidates will
sentiment that indicates rank and file members believe only further split the moderate/slightly liberal vote. In addition,
Democrats will maintain their majority after the 2020 election. the entrance of another billionaire will allow Warren to keep the
However, Republicans have plenty of pickup opportunities message on the disparity between the wealthy and the ‘rest of
themselves, given that 31 Democratic incumbents are from a us’ and away from Medicare for All. A potential complication for
congressional district that President Trump won in 2016. a liberal nominee is the continued strength of Senator Sanders
among the liberal wing of the Democratic Party. A united
Warren-Sanders front could be necessary for either to capture
RACE FOR THE DEMOCRATIC NOMINATION – the nomination.
LIBERALS AND MODERATES GO HEAD TO HEAD
The Democratic race appears to be coalescing into a two faction THE SECRET LIES WITH THE SENATE
race – moderates (led by Joe Biden and Pete Buttigieg) vs. the
liberal wing (led by Bernie Sanders and Elizabeth Warren). While 35 total seats are up for grabs in 2020. Republicans currently
countless external events can and will happen between now and hold a 53-47 majority, which sets up Democrats for an uphill
election day, we believe that the market under-appreciates a battle in order to make significant gains. Of the 35 races, 11 are
liberal candidate’s ability to capture the nomination and win the currently considered ‘safe’ Democratic and 18 ‘safe’ Republican.
presidency. We believe market volatility is likely to reemerge, This leaves only 6 ‘competitive’ seats. The last time that control
should a candidate from the liberal wing start to pick up delegates of the House or Senate flipped during a presidential election
(especially given that any candidate who wins the nomination, year was in 1980. Much attention will focus on the six races
by definition, has a solid chance of winning the presidency). currently deemed to be most competitive and most likely to
change party control. In our assessment, the seats most at risk
However, a resurgence of the moderate wing is an emerging in order of their potential to flip are as follows: 1. Alabama (D);
storyline as we inch closer to the first primary votes in Iowa in 2. Colorado (R); 3. Arizona (R); 4. Maine (R); 5. North Carolina (R);
early February. As of December, Joe Biden leads the national and 6. Iowa (R).
polls, and Pete Buttigieg has risen to first place in polling in the
first primary states (Iowa and New Hampshire). Concurrently, The increasingly polarized political climate has generated
two late contenders have recently entered the race that further greater emphasis on party affiliation/overlap between the
boost the moderate lane – Michael Bloomberg and Deval outcome of the Senate and presidential elections in individual
Patrick. The entrance of Bloomberg and Patrick is a clear states. In 2016, for the first time since the direct election of
manifestation of concerns that Biden cannot ultimately win the Senators, 100% or 34 of 34 Senate races matched the state’s
nomination, in addition to the potential emergence of a ‘Never preference in the presidential election. This is a dramatic shift
Warren/Never Sanders’ contingency. Bloomberg will not have over the last several decades when as recently as the 1988
Biden’s money issues and both Bloomberg and Patrick will try presidential elections, 50% of the Senate races did not match
to undercut Biden in the ‘logical liberal’ lane during the primary. the presidential preference of the state. This could partially

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