Investment Strategy Brief:
2024 Election Preview

Below is a transcript of this week’s video.

Hi, this is Jason Pride, Chief of Investment Strategy and Research at Glenmede.

As we enter the final month of the year, I hope everyone is happily preparing for their version of holiday and end-of-year activities with family, friends and colleagues. The pace of activity in our household and among many of my colleagues sure seems to be picking up and I suspect it may be with you as well. On a separate front – that of the 2024 elections – the pace is also beginning to pick up and will probably continue to accelerate.

It is still too early to draw too many conclusions or presumptions about the 2024 elections since voters have historically not started paying full attention to the Presidential and congressional races until after the Iowa caucuses. In fact, even the calendar may still be in flux this year with the Democratic National Convention and the State of New Hampshire still in disagreement over where New Hampshire’s January 23 primary election date, leading to odd circumstances like the absent of the sitting President from the ballot and the need for voters to use a write-in option. Of course, this will ultimately be resolved as the Republican Caucus is set to kick off the primaries on January 15 and at some point there is no going back.

Now, I know I just said it is too early to draw too many conclusions, but it is not too early to take note of how unusual the upcoming election is as well as what items may be up for debate that we care about. Even more unusual than the scuffle over the order of the primaries, the primaries themselves appear to both have front-runners that are broadly unpopular, a reflection that the average voter would prefer someone other than these two nominees, but of course is rather divided on who that “other” should be.

Perhaps just as important are the possible shifts in congress, as the balance of power in those chambers will determine the latitude that the next President will have to push their agenda. With Manchin choosing not to run for re-election, The one-seat Democratic majority in the Senate appears at risk, and in the House, the Republican’s razor-thin majority has its own set of risks.

The ideological divide in Congress has been widening for three decades and now sits at the widest observed level since 1879. This increasing polarization in Congress is expected to pose significant challenges for passing substantial legislation along anything other than party lines.

So let’s turn to what this means for us as investors, and here we have some good, bad and interesting observations. First the good – historically, markets have shown a preference for political gridlock, as it often translates into policy predictability and stability. gridlock has been good for the markets. It also means that any policy that does come through requires some grounding in the consensus, perhaps thwarting the passage of the poorly designed legislation put forth by either party’s extremes.

However, the rising cost of servicing the U.S. national debt is a growing concern for both the market and policymakers in Washington. The next presidential administration will likely have to make difficult decisions between tax hikes and government spending cuts. This fiscal reality may necessitate additional bipartisan cooperation, particularly on budget-related issues. This will likely be difficult to accomplish.

At the same time, Amid the political uncertainties and divergent viewpoints, there does appear to be a rare area of bipartisan consensus. Both major political camps seem inclined to move away from extensive globalization towards policies favoring onshoring and friend-shoring, relocating supply chains internally or to politically stable and economically allied nations.

So to summarize, the 2024 election cycle is about to pick up pace as we turn ahead to the new year. While it may be too early to call with 100% certainty, the front-runners in the nomination race for the White House in 2024 are both broadly unpopular incumbents. The ability of either resulting administration to enact policy will be largely rooted in what appears an uncertain outcome in congressional elections. Political polarization in Congress will likely make it difficult to pass meaningful legislation, but markets have historically liked gridlock. As for policy, the rising cost of servicing U.S. debt will likely pressure the next government to make difficult decisions between tax hikes and spending cuts amid this polarization, which will likely prove difficult. But, some rare point of bipartisan agreement exist, such as agreement to de-emphasize the China trade relationships in favor of onshoring and friend-shoring.

Thanks for listening! And please don’t hesitate to reach out with any questions.

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