If the GOP Wins Congress, What Would That Mean for Investors?

In a little more than four weeks, voters will decide if the Democrats get to hang onto their tiny margin to control Congress. History doesn’t favor the party occupying the White House—and especially when the president has low polling numbers.

Should the Republicans capture both congressional chambers, President Joe Biden’s agenda would be stalled, political observers say. For the financial community, a GOP win could bring changes affecting Wall Street and institutional investors.

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With a Republican Congress, there could be appropriations problems for the Securities and Exchange Commission, whose Biden-appointed chief, Gary Gensler, has taken an activist position that rankles many Republicans. Gensler wants to more tightly regulate hedge and private equity funds, as well as market makers’ payment-for-order-flow operations.

A Republican Capitol Hill majority also could stymie Biden’s plan boosting appropriations to enlarge the Internal Revenue Service, an expansion in line with a provision in the mammoth climate and health care bill that recently passed Congress. Republicans complain that adding more IRS agents would lead to harassment of small businesses. Democrats say a bigger agent force would crack down on wealthy tax cheats, including large public corporations, which could put pressure on their stocks.

Although a Republican Congress and a Democratic White House have the makings for epic legislative gridlock, there are some areas where lawmakers could reach bipartisan agreements. An analysis from Morgan Stanley Wealth Management pinpointed greater defense spending, cybersecurity, supply-chain strengthening and tech regulation.

In the 22 midterm elections from 1934 to 2018, the president’s party has lost an average 28 seats in the House of Representatives and four Senate seats, per the American Presidency Project study organization, at the University of California, Santa Barbara. Right now, the Dems have a mere eight-seat advantage in the House, where the split is 220 to 212, with three vacancies. In the Senate, the split is even, with Democratic Vice President Kamala Harris breaking ties.

The only times in the past four decades where the president’s party has won seats in the midterms has been in 1998 (Bill Clinton’s second term) and 2002 (George W. Bush’s first term). Both presidents had high approval ratings then.

One bright spot: Since 1982, the S&P 500 has logged an average return of 14% in the 12 months following a midterm election, thanks to the “clarity” the voting provided, according to an analysis by Fred Alger Management.

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Tags: Democrats, Gary Gensler, Internal Revenue Service, Joe Biden, midterm elections, Republicans, Securities and Exchange Commission, Wall Street

Princeton University’s board of trustees has voted to dissociate from 90 companies as part of an administrative process established last year that focuses on companies involved in the thermal coal and tar sands segments of the fossil fuel industry, or that are engaged in climate disinformation campaigns.

Thermal coal, which is burned for steam and used to produce electricity, was made a priority because it emits significantly more carbon dioxide than alternative available fossil fuels, the university said. It also said that tar sands oil, which is derived from loose sands or sandstone, also produces much higher emissions than conventional crude oil, including in its extraction and production process. However, Princeton said thermal coal and tar sands businesses can be exempt from dissociation if they can prove they can meet a rigorous standard for greenhouse gas emissions.

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And in a move to help the university reach its goal of eventually having an endowment portfolio that is net zero of greenhouse gases, the Princeton University Investment Company, which manages the university’s $38 billion endowment, will also eliminate all holdings in publicly traded fossil fuel companies. PRINCO said it will also ensure that the endowment does not benefit from any future exposure to fossil fuel companies.

The university said that the 90 companies targeted are all active in the thermal coal or tar sands segments of the fossil fuel industry, adding that they are among the sector’s largest contributors to carbon emissions. The list includes giants such as Exxon Mobil, Dominion Energy, Glencore, and TotalEnergies. The quantitative criteria used to determine the dissociation list was based on recommendations made by a panel of faculty experts in a report released in May.

The university said the board’s vote is a result of a two-year process that included input from stakeholders among the Princeton University community. It also said it will set up a new fund to support energy research at the university, partly to offset research funding that is no longer available because of the dissociation.

“The creation of this new fund is one of several ways that the university is helping to provide Princeton researchers with the resources they need to pursue this work,” Princeton University President Christopher Eisgruber said in a statement.