Political Surprise of the Year: Return of the Moderates

Insights and Market Perspectives

Author: 8

December 4, 2020

HERE'S A POSITIVE STORY: As progressives try to pull Joe Biden to the left, and Donald Trump's partisans claim a stolen election, there's been a political surprise: the center is making a comeback.

WHEN WE MEET WITH CLIENTS, a common refrain is that the country's left and right extremes have produced a vacuum in the center. Many investors ask - why can't there be compromise and bipartisanship? Well, we're seeing signs that the center is still alive.

SUPPORT FOR A COVID RELIEF BILL has highlighted this new trend. A bipartisan group of Senators has emerged, led by the powerful GOP moderate from Maine, Susan Collins. She has been joined by several Democrats, led by Joe Manchin of West Virginia. Others are on board - Democrats Mark Warner, Jeanne Shaheen, Maggie Hassan, independent Angus King, and Republicans like Joni Ernst and Bill Cassidy.

IN THE HOUSE, A CENTRIST GROUP called the 'Problem Solvers' now has 50 members, equally divided by Democrats and Republicans. They played a major role in keeping stimulus talks alive, opposing Speaker Nancy Pelosi's refusal to accept a generous deal this fall.

THERE ARE PLENTY OF POLARIZING POLITICIANS, to be sure, led by Trump, who will be tweeting for years to come. But we think Biden will resist a pull to the left from progressives like Alexandria Ocasio-Cortez; he won't pack the Supreme Court or make Puerto Rico a state.

A SHOT AT THE LEFT came this week from Barack Obama, who said in public what many Democrats have been saying privately - the 'defund the police' mantra hurt the party in several House races. The country may want to reform the police, but defunding the police is widely rejected.

ON THE RIGHT, we think the dam will burst soon, with increasing numbers of Republicans calling on Trump to end his destructive crusade to reverse the election. There are several Republicans to watch in addition to Collins, Ernst and Cassidiy. Sens. Mitt Romney and Lisa Murkowski have long sought centrist compromises.

THE KEY RELATIONSHIP: Whether a mood of 'let's get things done' will prevail depends largely on the dynamic between Biden and Mitch McConnell. The latter has been slow to acknowledge Biden's victory, but the wily Senate Majority Leader now has some wiggle room to negotiate.

IF A PANDEMIC STIMULUS BILL PASSES, which is increasingly likely, optimism over bipartisanship will grow as 2021 begins. It could become a trend; maybe the center hasn't collapsed after all.

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