Phil: I'm Phil Orlando, chief equity strategist at Federated Hermes in New York.
Interviewer: What do you think is in the cards for the midterm elections, and how might the financial markets respond?
Phil: In the 2020 presidential election, the Democrats' lead in the House shrank from 35 seats to only 10 seats. Now, there are 31 Democrats in the House of Representatives now who have announced that they will not seek reelection. An open seat is a much easier seat for the Republicans to win and eventually reclaim. In the postwar history of the United States, Democratic presidents have lost an average of 38 House seats in their first midterm election. Most recently, President Clinton, in 1994, lost 52 seats in his first midterm election. President Obama, in 2010, lost 63 seats in his first midterm election. Now, President Biden's approval ratings have fallen sharply over the last 15 months, down from about 57% to 41%. Why? I think the surge in inflation and energy prices are probably at the top of the list. So, as we look at the political pendulum right now, we believe that we'll swing sharply to the right on November 8th, reintroducing split government, as the Republicans regain control of the House of Representatives. Now, the stock market has historically viewed divided government favorably, so we could see a strong fourth-quarter rally in stocks as the political pendulum shifts to the right.
Disclosures: Past performance is no guarantee of future results. Stocks are subject to risks and fluctuate in value. Views are as of March 24, 2022 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Federated Advisory Services Company 22-30100 (3/22)