Final Election Predictions

ELECTIONS OFTEN REFLECT MOMENTUM SWINGS and the state of the economy, and that certainly is the case this year. In our final predictions, we think Republicans will sweep to control of the House, while barely capturing the Senate. And in several high-profile gubernatorial races, momentum clearly has swung to the GOP.

THE HOUSE CALL IS EASY — the only suspense is the size of the GOP victory. We’ll stay on the low side, predicting that Republicans will gain 17 seats; they only need a net of 5 to regain control. Some analysts are in the 20-25 seat range, but 17 would be a comfortable margin for new Speaker Kevin McCarthy to assert control.

THE SENATE HAS ALWAYS BEEN A CLOSE CALL, but momentum has swung to Republicans in several races, and there are numerous paths for them to win a net of one seat, which would give them control, ending the current 50-50 tie.

BASED ON A CLEAR MOMENTUM SWING in the past two weeks, we think the Republicans will narrowly hold on to all but one of their seats — prevailing in Ohio, Pennsylvania, and Wisconsin. The one possible GOP loss is in Georgia, although Herschel Walker has narrowed his gap.

THE DEMOCRATS, ON THE OTHER HAND, are in danger of losing their seat in Nevada, and are barely ahead in Arizona, New Hampshire and Colorado. Our hunch is that at least one of those three seats could flip, or that Walker could win in Georgia — either scenario could give the Republicans a one-seat net victory, thus taking the Senate.

WHAT’S CHANGED? First of all, voter interest in the election is exceptionally high, with Republicans more likely to turn out. Second, polls show deep anxiety over the economy, urban crime, the Texas border and government spending, which voters believe has exacerbated inflation. In a surprise, abortion is only the fourth or fifth most important issue in most polls.

THE BIDEN FACTORS: A refrain we hear constantly involves the President’s inability to reduce inflation. Public anxiety over the economy is an enormous factor (even though the economy is fair shape, as this Thursday’s GDP report may show).

THE OTHER BIDEN FACTOR is his physical and mental frailty, which is the major reason, in our opinion, why he will not seek re-election (even most Democrats don’t want him to run again). And Biden must not relish the prospect of a ferocious push-back from a Republican House, which will investigate everything from Hunter Biden’s business activities to the U.S. withdrawal from Afghanistan.

FOR THE FINANCIAL MARKETS, the prospect of gridlock or a Republican tilt would be most welcome. Activist legislation would stall, there’s no chance that any major taxes could win enactment, and a less hostile climate for fossil fuels would emerge.

ONE NOTE OF CAUTION: We may not know for days — or even weeks — after the Nov. 8 elections who won control of the Senate or the winners of key gubernatorial races in states from New York to Oregon. A virtual tie in Georgia or Nevada could result in recounts — and, regrettably, more charges by candidates who lost that there was voter fraud. This is the new normal in American elections.

Related: The Democrats’ Looming Post-Mortem

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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