Market view and Insights
Gauging voter sentiment and providing guidance for financial markets: an interim report on the 2022 midterm elections in the United States.
The past few weeks have brought new momentum to the power struggle in the US Congress. There are still around five months to go before the US midterm elections, which will be held on 8 November 2022. The Democrats, who currently hold a slim majority in both chambers of the House, are starting from an extremely difficult position. US President Joe Biden is currently more unpopular than ever and, with an approval rating of 40.6%, is in a worse position than any other president before him. All the more reason for the ruling party to hope that it can benefit from the heated debate on the fundamental right to abortion. However, the outcome of the latest test of voter sentiment in the state of Texas is sobering.
But the elections in November are not just about which party will have control of the House of Representatives, the Senate and state governorships over the next two years. The midterm elections will also shed light on Donald Trump's chances of winning if he puts himself forward as a presidential candidate for the 2024 elections.
At the beginning of May, a document leaked to the US news outlet Politico caused a furor. In this document, US Supreme Court Justice Samuel Alito writes: "We hold that Roe and Casey must be overruled." The issue up for discussion is nothing less than the fundamental right to abortion, which the Supreme Court has constitutionally upheld based on the precedents set by Roe v. Wade (1973) and Casey (1992).
This incident is unique: never in the history of the Supreme Court has an opinion been released to the public prior to its scheduled publication date. In this case, the opinion was not scheduled to be released until the end of June. The overturning of Roe v. Wade would be a watershed, so Democrats are now hoping that the debate over abortion rights will result in support for their election campaign.
The majority of Americans is in favor of the right to abortion. Depending on the poll, 85-90% are in favor of abortions being legal at least under certain circumstances, according to data compiled by the platform FiveThirtyEight.
But the fact that the outcome is not a foregone conclusion was clearly demonstrated in the primaries in Texas's 28th Congressional District, which lies deep in the state's south and stretches from San Antonio to the Mexican border. For 17 years, arch-conservative Democrat Henry Cuellar has represented this district in Washington. Cuellar is the only Democratic member of the House of Representatives who opposes making abortion a right by law.
At the end of May, he was challenged by his party colleague Jessica Cisneros, who is from the progressive camp and is particularly committed to healthcare for women. The outcome of the election is still open, but it is starting to look like Cuellar is likely to win by a razor-thin margin despite his controversial position.
This example once again illustrates the divide that exists within the Democratic party: although the Democrats expect the debate surrounding abortion to attract new voters, the party leadership has not been able to bring itself to support Cisneros. The issue is likely to gain further momentum at the end of June, when the Supreme Court publishes its final opinion.
There is no doubt that abolishing the right to abortion would fundamentally change US society. But in everyday life, Americans currently have numerous other problems to keep them busy. At the top of this list is high inflation. According to a survey by the Pew Research Center, 70 percent of citizens consider the current rapid inflation to be a very big problem.
LGT’s experts are always busy analyzing global economic and market trends. Our research publications on the international financial markets, sectors and companies will help you make informed investment decisions.
This is fueling uncertainty and dissatisfaction. For example, the proportion of people who fear that they will no longer be able to pay bills or will have to lower their standard of living has risen compared with the previous year. For the Democrats, the high inflation figures are a disaster, as voters are likely to use the midterm elections to give a voice to their displeasure. President Joe Biden is making an effort to address citizens' concerns. His top priority, he says, is to curb high inflation. But so far, there has been a lack of concrete and far-reaching measures. And so to date, there have instead been efforts to find a culprit on whom to place the blame. "Putin's price hike continues to influence food and energy prices," Biden said, commenting on the latest inflation data from April.
By contrast, Republicans are not missing any opportunities to blame the Democrats for inflation: "Biden-flation" is a catchphrase they are using to refer to the USD 1.9 trillion stimulus package that the party single-handedly pushed through in 2021 and that is now expected to fuel inflation.
While Biden is battling low approval ratings, his former Republican opponent Donald Trump is using the midterms to gauge his chances for another term in the White House. The midterm elections are, in fact, considered the unofficial kick-off for the 2024 presidential election.
In various primaries around the nation in recent weeks, Trump has endorsed candidates who, among other things, share his narrative of a stolen 2020 election. The former president’s track record has been mixed so far, however, and the most recent test of public sentiment in the state of Georgia in late May was particularly devastating for him. Not one but two establishment Republicans prevailed in the primaries, namely Brian Kemp, the incumbent governor of Georgia, and Brad Raffensperger, the incumbent Secretary of State.
Trump holds the two men directly responsible for his defeat in the 2020 presidential election, as they recognized Biden’s narrow victory in the contested southern state. He therefore supported two challengers in this year's primaries, but they stood no chance. The defeat is especially bitter because his former vice president, Mike Pence, supported Kemp's campaign.
Trump's flop in Georgia could now breathe new life into the battered establishment of the Grand Old Party. Meanwhile, Trump is likely to continue to tour the US in the coming months and mobilize his supporters - he is still one of the most popular politicians among the party base.