Moneybeat: People, policy, and election stakes

JENNY ROUGH, HOST: Next up on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: It’s time to talk business, markets, and the economy with financial analyst and adviser David Bahnsen.

He’s head of the wealth management firm The Bahnsen Group and he’s here now.

David, good morning!

DAVID BAHNSEN: Well, good morning, Nick, good to be with you.

EICHER: Just real quickly off the top, David, this strike against Boeing.

Its biggest union, about 33,000 machinists, rejected a new contract proposal. They extended a strike already six-weeks running at Boeing production sites. These are crucial for manufacturing its top-selling planes. The company’s reporting a $6 billion loss this quarter; it’s planning to reduce its workforce by 10 percent. Boeing’s looking at taking on debt or selling stock, to stave off a downgrading of its credit. It’s got some serious reputational damage because of highly publicized failures. David, are we looking at the death of a company?

BAHNSEN: No, I don't think so at all. I think there’s a lot that’s going to change in the company. I don't know how Boeing is particularly doing this. They've been struggling and losing market share to Airbus for years. They've had significant problems in terms of quality control for a number of years, and their ability to right that ship is outside of my purview, but I do not think it's a systemic issue for Boeing—not at all.

EICHER: Alright. Your Dividend Cafe over the weekend was so interesting to me—about 16 questions and answers you did with readers of your newsletter,. topics ranging from the impact of the Senate composition on markets to predictions on trade and energy policies, the potential influence of advisors, broader economic concerns…

But one takeaway: You’re really looking closely at how control of the Senate comes out. Given your view on the Senate’s influence on the economy, let’s suppose the Republicans take control as they’re projected to do what policies would most likely emerge regardless of who wins the White House?

BAHNSEN: Well, I think it means very different things depending on who’s president. But if you have a Republican majority with a Harris presidency, it essentially means gridlock. Quite literally, I don’t think there would be any significant legislation that would get passed.

If there’s a Republican-majority Senate with a Trump presidency, it becomes very different. I doubt that the Republican-majority Senate would be willing to be at odds with the Trump administration over much at all. So, in one case, you get gridlock, and in the other, you lose some of the separation of powers. There are pros and cons to both scenarios.

But if I’m right, and the polls and general political expectations are right that Republicans will have a Senate majority, with the only question being whether it’s 51, 52, or 53 seats, then the tail risk to the economy resets. The worst-case scenarios—like significant tax increases or filibuster removal—that a Harris presidency might try to implement are all off the table. That’s a huge outcome and becomes the new baseline in a Trump administration with a Republican Senate.

Things could still get tricky, as some actions require 60 votes unless they eliminate the filibuster, which I certainly hope they won’t do. But whatever level of spending the Trump administration wants, I don’t expect any pushback from a Republican-majority Senate.

EICHER: Let’s wrap up with the top of the ballot, and that’s the presidential race. You say, personnel is policy. So give me your appraisal of what you’d expect from each respective administration, and go ahead and take the rest of the time on this one.

BAHNSEN: For economic policy, I actually feel I have more clarity on who a Harris administration would bring in. I expect she doesn’t have a Rolodex to fill it with all her own people or all California alumni. If she did, I think it would be a disaster. I assume it would be a combination of Biden, Obama, and even Clinton alumni—by the way, her campaign is largely that, too. That’s not great but not worse than you might expect; just… not good.

For a Trump administration, the 2016-2020 term gave us a good indication of certain Reaganite, traditionalist, supply-side economic thinkers. This time, though, he has J.D. Vance as his vice-presidential candidate, who is much more of an economic nationalist.

If Trump wins, Nick, I cannot wait to record with you three weeks or so after the election outcome is known. His first three to five appointments will tell us a lot. We’re having daily conversations about who we think those people will be. For instance, the Treasury Secretary, who will have to be named pretty early, will reveal a lot.

There are competing ideologies between Reaganite and economic nationalist factions that Trump might draw from for his economic policy team. But President Trump also loves hiring and firing Wall Street figures. His first Treasury Secretary, Steve Mnuchin—a Goldman Sachs alum—was the only cabinet member who stayed from day one to the last day. Gary Cohn, former Goldman Sachs president, was his National Economic Council director before Larry Kudlow came in. So, there are technocratic Wall Street figures who would be effective and useful, and Trump may want to go that route as well.

And there’s Howard Lutnick, the chair of Trump’s transition committee. Lutnick is a billionaire CEO of Cantor Fitzgerald, an extremely conservative, extremely gifted individual I’ve known of for years. He doesn’t fit into one political mold, either. All of this makes Trump a bit less predictable than your conventional politician.

EICHER: Ok, David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group.

If you aren’t subscribing to David’s regular market writing you can find out more at Dividend Café-dot-com. It’s free and you can receive it in your inbox. Dividend Cafe-dot com.

Thanks for your analysis this week, David, we’ll see you next time.

Have a great week!

BAHNSEN: Thanks so much, Nick, good to be with you.

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