Special Election Edition: Avalon's Bill Stone
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What is the main topic discussed in this episode?
With a special Your Money briefing, I'm Charlie Turner in New York for The Wall Street Journal.
How did the 2018 midterm results produce a divided Congress and immediate market reaction?
The 2018 midterm elections are over, and the result, as expected, is a divided Congress. The Democrats have regained control of the House while the Republicans added to their margin in the Senate. How will Wall Street react to a split Congress, and what does the election mean for issues such as taxes, regulation, and spending? Bill Stone is co-chief investment officer at Avalon Advisors, and he joins us from Houston. Bill, as we speak, the markets are up post-election. That doesn't mean stocks will stay up, given the volatility that we've had. Does Wall Street like a split Congress?
I think Wall Street really likes not having a surprise and removing one uncertainty out of our long list of uncertainties. So I think that's what we did accomplish. As you mentioned, the split Congress was the consensus going in, and we got that.
Why does Wall Street prefer the lack of surprise from a split Congress?
I think the other side was because the Republicans also picked up some seats on the Senate, which was I would argue as a prize, I think there's also less a chance or essentially let's call it no chance of any rollback in any of the tax cuts that we've had.
Might we see some volatility tied to uncertainty about whether President Trump can get his agenda passed now that we have a Democrat controlled House? After all, bills start in the House.
Yes. I mean, I think most would expect that.
Does a split Congress mean no chance of reversing the 2017 tax cuts?
Less chance of getting some things passed. I think probably the maybe bigger item, which I still don't think we have much real insight into yet, is the tariff side of things. And let's just say it, China and how he's going to really react on that side. You know, he sent out a tweet already this morning. talking about that he was going to focus back on that. Does that mean he goes for a short-term deal there? He still has room to work there, but I think that's the part that, as you're thinking about volatility, we haven't ended that side. So I think that's one thing the markets will be watching closely.
I'm sort of confused about that bill. President Trump, by executive order, can enact tariffs. But as far as trade deals with Mexico and Canada, the European Union, China, Japan, he still needs congressional approval for that, and that involves the House.
How could the midterms change the Trump administration's approach to China and tariffs?
Or he may get support from the House.
True. No, I meant more really focused on the China side of things is how far does he take the tariff situation before he perhaps goes for a short term deal? Because I do think the one thing to keep in mind, and I think maybe this is also part of the cheer on Wall Street, is that once the midterms are over, really. most politicians turn and certainly presidents turn to thinking about the reelection, right? And if you're a president, you are concerned about making sure that the economy is doing well. That is going to drive a lot of your approval. And I think that's where perhaps you see the pivot on him being willing to cut some sort of a deal with China in the end and kind of take that off the table.
But again, that's one we don't know yet. That's something we're going to have to watch.
I'm speaking with Bill Stone.
What do the election results imply for taxes, the debt ceiling, and infrastructure spending?
He's co-chief investment officer at Avalon Advisors. And you're listening to your Money Briefing from The Wall Street Journal.
Bill, what does the election result mean for issues such as taxes? Will Democrats in the House call for, for instance, raising the corporate tax? And what about tax cuts, the deficit, the debt?
Well, I mean, I think you really can say, especially with the Republicans picking up more seats in the Senate and really the Democrats having a really pretty narrow lead in the House or narrow majority there, they may still try and do some of those things on the tax side in terms of raising taxes or rolling back. But let's just be honest, it's not going to go anywhere. So that's not going to happen. I think probably if there's one thing you need to, you know, if we're going to spend our time being concerned about something, we do have to raise the debt ceiling in 2019.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:11
2
How did the 2018 midterm results produce a divided Congress and immediate market reaction?
0:11–0:59
3
Why does Wall Street prefer the lack of surprise from a split Congress?
0:59–1:29
4
Does a split Congress mean no chance of reversing the 2017 tax cuts?
1:29–2:20
5
How could the midterms change the Trump administration's approach to China and tariffs?
2:20–3:11
6
What do the election results imply for taxes, the debt ceiling, and infrastructure spending?
3:11–5:01
7
How might deregulation, healthcare policy, and sector-specific outcomes (energy, drug pricing) shift after the vote?
5:01–7:01
8
Will the midterms affect Fed policy or presidential pressure on interest rates?
7:01–8:06
Speakers
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