Thought of the Week
It’s a done deal, a piece of cake. A slam dunk, lock. An open-and-shut, signed-sealed-and delivered, sure thing. But is anything ever guaranteed or a sure bet? At the start of the year, prominent political analysts told us that after a wildly chaotic 2025, 2026 would be the year American politics would return to normal. Well, just this week, one of my favorite political consultants comically observed that “the first quarter of 2026 has been one hell of a decade” with the Maduro capture, the Epstein documents, the Supreme Court’s IEEPA ruling, war in Iran, the longest government shutdown in history…Ok, ok, so politics is notoriously messy, but what could be more solid than gold? The precious metal is a classic safe haven during periods of economic and political uncertainty. Yet, as inflation fears mounted, the metal fell 16% over the first four weeks of the war with Tehran. No worries, commodity trading is rife with volatility. But, after a historic showing at the Winter Olympics, and during the 250th anniversary of the nation’s founding, it’s a near certainty that Americans would rally around the President during times of war, right? Wrong. Recent polls show President Trump’s approval rating at all time lows below 40%. Even a Fox News survey found the president’s disapproval rating at 59%, the highest level recorded in either of his terms. Now, a number of economists are telling me that despite rising inflation and war, the evidence for cutting U.S. interest rates could emerge much more quickly than the evidence to justify hikes. Their argument is that although it is inevitable that the March inflation report will show higher inflation arising from the war, just a month of labor market faltering would be enough to shift the policy debate, because the Fed already views employment as having a number of downside risks. They insist that the case for cuts will appear before the one for hikes. I’m not buying it. At least not yet. With a resilient economy, a low hire-low fire labor market, and energy-induced inflation with several more months to run, I’m going to go out on a limb and guarantee that the Fed will not cut rates until at least the second half of the year. It’s in the bag. Just ask Duke.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Eurasia Group Says the GOP’s Advantage in the Senate is Eroding. Democrats are gaining in the Senate race (40% odds to control the chamber, up from 35%), with a plausible path to a majority through holding all their current seats and winning in North Carolina, Maine, Ohio, and Alaska. Key signposts include an expanding lead in generic congressional ballot polling, special elections in New Jersey and California, and cost-of-living indicators over the next few months. If the generic congressional ballot shifts by at least two points more toward Democrats from the current 5.5-point lead, odds of regaining the chamber would further increase above 40%. Should Democrats win the Senate, the policy outlook for 2027 would not be radically different given that gridlock is the baseline. However, it would put a potential trifecta (control of the House, Senate, and White House) within reach in 2028; the policy consequences in the next presidential term would be tremendous, setting Democrats up to enact major tax and spending changes in 2029.
Inside EPA Reports on Democrats’ Clean Energy Policy Agenda as the Midterms Draw Nearer. Senate Democrats are sharpening their clean energy agenda for the midterm elections and beyond, touting five priorities they would pursue if they win back control of the chamber in November while continuing to frame climate mitigation action as an increasingly pressing “pocketbook” issue. While the Democrats’ agenda gives a nod to ongoing bipartisan Hill discussions on permit streamlining, its heavy criticism of Trump administration policies alludes to many items that would best fit in a post-midterm agenda, including a vow to restore a suite of clean energy tax credits from the Inflation Reduction Act (IRA). Concerns about rising electricity costs due in part to increasing data center power demand have continued to mount, and the ongoing Iran war has boosted gasoline prices on the order of 30%. Minority Leader Schumer (D-NY) touted Democrats’ five priorities: (1) affirming that clean energy is “affordable energy;” (2) establishing “permitting certainty;” (3) upgrading an “aging grid with transmission and storage;” (4) ensuring that data centers pay their fair share and “promote healthy communities and costs;” and (5) providing “systematic protection for consumers from rising prices.”
Inside U.S. Trade Warns USMCA Uncertainty is Chilling Investment Across North America. Uncertainty over the upcoming U.S.-Mexico-Canada Agreement review and U.S. trade policies broadly is limiting capital deployment and delaying investment decisions throughout North America, harming all three economies, according to a former deputy head of mission at the Canadian embassy in Mexico. USMCA is up for its first six-year review in July, and U.S. negotiations with Canada have hit numerous snags. In fact, USTR Greer said last week that Canada was lagging Mexico in talks to date. Uncertainty about the future of the agreement is impacting businesses, limiting the deployment of capital, and delaying investment decisions across all three countries in North America. Business leaders and investors, both outside North America and with operations in the region, are delaying expansions and holding off on deploying capital until they have more clarity about the USMCA’s future, and business confidence surveys reflect the uncertainty caused by U.S. trade policies more broadly. The most recent surveys indicate that rather than expansion and increased investment ‘firms are prioritizing spending on routine maintenance, partly because of continued trade-related uncertainty; impacted companies also attribute weakness in domestic sales to the broad spillover effects from tariffs and trade-related uncertainty. What’s more, an increasing share of businesses are reporting higher sales to non-U.S. markets in response to trade tensions with the United States. Investment plans and hiring remain “held back by uncertainty and soft demand.” Canada says it plans to secure exemptions from all U.S. duties—including those imposed under Section 232—on any goods that comply with USMCA rules.
“Inside Baseball”
Punchbowl News’ Canvass Survey* Reveals that K Street Believes White House Immigration Enforcement Will Harm the GOP in the Midterms. Most K Street leaders (88%) say the Trump administration’s approach to immigration enforcement will harm Republicans in the midterms. This comes after federal officers shot and killed two protesters in Minnesota in January. Now, the Department of Homeland Security (DHS) has been shut down since Feb. 14 with no end in sight. More than three-quarters of Republican respondents to The Canvass said President Trump’s immigration enforcement crackdown would harm the GOP come November. Only 17% of Republicans on K Street said the administration’s deployment of ICE and CBP will help their party. Only a quarter of Canvass respondents said immigration would be in the top three most important issues for voters in the midterms. K Street leaders said that inflation and the economy will be the most important issues to Americans in November. Health care ranked ahead of immigration, with 34%.
Canvass Survey Also Reveals that K Street Believes It Unlikely GOP Senate Guts the Filibuster. Nearly all K Street leaders (93%) say it’s unlikely that Senate Republicans will eliminate the filibuster in 2026. It’s no secret that President Trump has publicly pressured the GOP to axe the filibuster to get some of his legislative priorities across the finish line, most recently insisting that Senate Majority Leader Thune and Republican leaders gut the Senate tradition to pass the SAVE America Act, legislation requiring ID and proof of citizenship to vote. A total of 55% of Republicans in the survey said passing the SAVE America Act would help their party in the midterm elections this November, but only 9% of GOP respondents believe it’s possible for their party to end the filibuster.
*The Washington office participates in The Canvass survey.
In Other Words
“We’re going to hit them extremely hard over the next two to three weeks,” President Trump about the Iran war during his White House address.
“I can’t get a ballroom approved. It’s pretty amazing, right? If I was a king, we’d be doing a lot more. I’m doing a lot, but I could be doing a lot more if I was a king,” President Trump at the White House Easter lunch.
Did You Know
Washington, D.C.’s Metro rail subway system turned 50 years old last week. The Metro embarked on its first trip from Rhode Island Avenue to Farragut North on March 27, 1976, operating on just the Red Line. Since then, more than 7 billion trips have taken place across all rail lines. The Washington office is not far from the Farragut North station.
Graphs of the Week
Retail Sales Rebound, Q1 Spending Still Tracking Weaker. A solid rebound in February retail sales from a weak January reading suggests overall consumer spending in Q1 2026 likely grew at a slower, but still positive rate. A 0.6% rebound in headline retail sales in February followed a 0.1% decline and was likely payback for a sluggish weather-impacted result in January. Adjusted for inflation, real retail sales grew by 0.3% in February, following a streak of negative readings in the months prior. After a -0.3% reading in January, Q1 real retail sales growth is likely close to being flat. Looking ahead, March sales are a wild card, as consumer behavior is hard to predict amid the oil price shock hitting gas pumps since the beginning of the month. The latest data corroborates The Conference Board’s forecast for real consumption to grow at a pace of 1.7% in Q1 2026, down slightly from 2.0% in Q4 2025.
Do Americans Trust Their Elections? In 2024, only 44% of voters expressed significant confidence that presidential election ballots would be counted accurately, but 76% said they were confident their state and local elections were fair and accurate. Although many Americans believed the national election would be illegitimate, that notion was mitigated by the belief that their own votes would be counted fairly. This is changing; Americans’ confidence in the security of their local elections has decreased since 2024. Today, just 66% of voters express confidence in their local elections, an all-time low in American history. Although Republican voters in 2024 were the main constituency that believed American elections were no longer secure, Democrats and Independents are also now reporting a lack of confidence in elections.