While the presidential race will dominate headlines, the ultimate market and economic impact will center on the outcomes in the House and Senate.
2020 kicks off an election campaign cycle that will determine the trajectory of the Trump policy agenda and its associated impact on the market. We believe Trump’s reelection campaign will center on a message of positive economic and market performance — a virtual necessity from a historical standpoint for the reelection of an incumbent president. Democrats will be looking to see if they can continue the momentum from the 2018 and 2019 elections, where suburban voters have swung away from Republicans and toward Democratic candidates.
Before we get to the general election, Democrats will first need to choose a nominee, which could lead to increased volatility in the first half of 2020. With a large field of candidates swapping front-runner status and party rules that disburse delegates on a proportional basis, there is an elevated probability than none of the candidates are able to achieve a majority of delegates prior to the convention. Alternatively, the battle to win the majority could reinforce some divisions within the Democratic Party. Should Democrats fail to produce a candidate that the party can rally behind, or should a contested primary process give rise to a legitimate third party candidacy, both could be seen as benefiting the reelection chances of President Trump.
35 total seats are up for grabs in 2020. Republicans currently hold a 53-47 majority, which sets up Democrats for an uphill battle in order to make significant gains. Of the 35 races, 11 are currently considered “safe” Democratic and 18 “safe” Republican. This leaves only six “competitive” seats. The last time that control of the House or Senate flipped during a presidential election year was in 1980. Much attention will focus on the six races currently deemed to be most competitive and most likely to change party control. In our assessment, the seats most at risk in order of their potential to flip are as follows: 1. Alabama (D); 2. Colorado (R); 3. Arizona (R); 4. Maine (R); 5. North Carolina (R); and 6. Iowa (R).
In the House, Democrats built a solid majority in the 2018 midterm elections and Republicans would need to net 20 seats for the House to flip. Recent Republican retirements point to more potential pickup opportunities for Democrats, a sentiment that indicates rank and file members believe Democrats will maintain their majority after the 2020 election. However, Republicans have plenty of pickup opportunities themselves, given that 31 Democratic incumbents are from a congressional district that President Trump won in 2016.
All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change. Past performance may not be indicative of future results.