Republican Glenn Youngkin won the race for governor in Virginia, a state that had been leaning Democratic, while New Jersey’s gubernatorial contest has been too close to call after the GOP’s Jack Ciattarelli performed above expectations in that blue state.
So what does that mean for Democratic-run Washington, which is trying to pass bills focused on infrastructure
and social programs? And could there be effects on markets?
Below are some initial reactions from analysts, as the main U.S. stock gauges
struggled for direction on Wednesday morning ahead of a policy statement from the Federal Reserve.
• Tuesday night’s results “are consistent w/ a political environment in which Republicans would comfortably take back both the House and Senate in 2022,” tweeted Dave Wasserman, U.S. House editor for the Cook Political Report.
• Top Democrats in Washington, D.C., probably now will “circle the wagons and pass BIF & reconciliation in coming weeks,” said Chris Krueger, a managing director at Cowen Washington Research Group, in a note. That is the most likely scenario, according to Krueger. BIF stands for the bipartisan infrastructure framework and refers to a $1 trillion bill focused on roads, bridges, rail, broadband and more, while reconciliation refers to the $1.75 trillion Democratic social-spending bill, which is slated to advance through a partisan process known as budget reconciliation. Krueger said passage of the measures is most likely to happen around Thanksgiving, with action this week unlikely, and “Christmas the backstop.”
• “Our view is that it likely locks in the package as is, placing pressure on Democrats to salvage something to run on in 2022,” said Ed Mills, a Washington policy analyst at Raymond James, referring to the party’s “Build Back Better” social-spending package. “From a market perspective, we view the current versions of the social spending and infrastructure bills as a market positive,” Mills wrote in a note.
• “I don’t think this complicates passage,” Ben LaBolt, former President Barrack Obama’s 2012 campaign press secretary, told Politico. “I think it helps accelerate it. It’s clear to the average Democratic member of Congress that they need to go into the [2022 midterm] election with a strong case that they’ve helped families economically in the short and long term. These bills do that.”
• “We don’t disagree with the consensus that Democrats will lose the House — perhaps by 20 seats — and could lose the Senate as well,” said Greg Valliere, chief U.S. policy strategist at AGF Investments, as he reflected on Tuesday night’s results. After such an outcome for the 2022 midterm elections, President Joe Biden would “have dominant veto power in his second two years, and the resulting gridlock wouldn’t be a bad scenario for the markets,” Valliere said in a note.
• The “message to Republicans” from Virginia’s gubernatorial election is their blueprint should be to “nominate someone other than Trump in 2024, and win back suburban voters,” tweeted author and Daily Beast columnist Matt K. Lewis. Youngkin, previously co-CEO of private-equity giant Carlyle Group
was endorsed by former President Donald Trump and didn’t reject him given his popularity with Republicans, but he drew attention in recent weeks for how he avoided campaigning with Trump.
• “There were a lot of electoral questions that the Virginia gubernatorial race was well-positioned to help answer,” wrote analysts at Sabato’s Crystal Ball in a blog post. “Could Republicans make up ground in the suburbs with Donald Trump no longer in the White House? Would Republican voters turn out in force with Trump gone? Could Democrats fall even further in heavily white, rural/small town areas? Was the history that suggested holding the White House is a burden for the presidential party in Virginia still operative? Unfortunately for Democrats, and fortunately for Republicans, the answers to all of these questions were a resounding ‘yes.’”
• “In the immediate term, we expect the election results to force both progressives and moderates to dig into their respective positions of passing once in a generation legislation and energizing the base or moderating the approach to stave off inflation and appeal to swing voters,” said analysts at Height Capital Markets in a note.