Key Takeaways
  • Powell semi-annual testimony makes few waves but reaffirms support to inflation fight.
  • Congress goes home for July 4 break.
  • SCOTUS Roe decision frames potential abortion debate as Midterms approach. Can issue change the calculus for Democrats as they fight to keep control with President Biden facing near record low approval ratings.
  • Gun legislation approved.

From a markets perspective, last week was highlighted by the testimony of Fed Chair Powell before the Senate Banking Committee and the House Financial Services Committee.  While there were no surprises that impacted markets the chair squarely faced the issue of rate increases leading to a recession.  Under questioning from the Senators and Representatives he conceded that a recession was “certainly possible” due to the unknown of Covid 19 and the war in Ukraine.

This coming week official Washington is heading out of town for July 4, but the next date on the DC economic calendar is July 6, when the minutes from the June FOMC meeting will be released. I will be watching for any clues as to how dovish the two new Biden Governors may be as the Fed looks at data prior to the July FOMC meeting. The third Biden Governor, Michael Barr, should be on the Board by the next meeting of the FOMC.

Obviously, the headlines on the political front came from the Supreme Court and their decision to overturn Roe vs Wade.  While markets may be agnostic on the issue of abortion, for the political world the SCOTUS decision put the issue front and center as to whether or not abortion will change the political landscape and impact the 2022 midterm elections. With President Biden’s popularity at near record low levels, Democrats appear headed for substantial losses when Americans go to the polls in November.

The historical trend line is bad and voters are mad paying more at the pump and for nearly every item at the grocery store.  The party controlling the White House has lost seats in Congress in 37 of the 40 midterms since the Civil War.  Could 2022 be different?

From my days in politics Republicans looked at abortion as a “safe” issue.  Those who opposed abortion, and wanted to make it illegal, tended to be single issue voters and Republicans catered to this constituency by signing on to a constitutional amendment reversing Roe and making abortion illegal. Since Roe was the law of the land, and amending the constitution was not going to happen, it became a safe issue.  Republicans could say they were against abortion, but still get the votes of those who wanted to give women a choice on abortion with a wink that outlawing abortion wasn’t going to happen.

Polls show that a substantial majority of voters, including suburban women,  are opposed to the repeal of Roe and support abortion rights.  But suburban women turned to Republican candidates on issues ranging from “law and order” to smaller government and lower taxes.  I worked on Republican campaigns where the political calculation was straightforward; oppose abortion in an appeal to one-issue conservative anti-abortion voters but make strong public speeches on other issues that resonated with the swing women voters in the suburbs.

In politics much is attached to issue intensity which can drive voters to the polls.  On abortion much of the intensity was on the side of those who wanted to end abortion.  The suburban women who voted Republican may answer a poll that they support abortion rights, but it was a low intensity issue; it didn’t drive them to the polls or push them to a specific candidate.  Whether or not Republicans and independent voters who support abortion rights will look to a candidate’s position on abortion as a high intensity issue after the SCOTUS decision could well be the key as to success for Democrats in November.  Political strategists will be looking to see if Democrats can beat the odds and not take the widespread defeat one would expect with a President in the White House with low approval numbers.

While abortion grabbed the headlines at the end of last week, some political strategists also believe that after the recent mass shootings, gun control could move up on the intensity scale with swing voters.  This past week Congress passed the first gun control legislation in decades.  In the Senate, led by Leader McConnell, 15 of the 50 Republican Senators supported the measure.  In the House it was a more party line vote, passing on a vote of 234 to 193.  All the House Republican Leaders opposed the bill and only 14 of the over 200 House Republicans voted in support.

Disclosures (show)

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