Thought of the Week:
To look at me today you might not know it, but there was a time when I was an avid distance runner. Over a nine-year period, I trained for seven marathons, ran in and finished five; ran two half-marathons; completed a dozen 10-milers and an equal amount of 10ks; and regularly logged 25-28 miles a week. Early in my training, a case of the shin splints sent me on a quest to find the perfect shoe, with just the right amount of stability and cushion, but not motion control, oh Lord, not a motion control shoe…runners will understand, motion control shoes are specifically designed for those who severely overpronate. During this time, I tried on and bought nearly every make and model—Adidas, Asics, Brooks, New Balance, Nike, Saucony, maybe even a Mizuno here and there. The point is, every few months, I wasn’t just researching the latest and greatest releases, I was purchasing them too. After a severe knee injury, I gave up running, and got back into golf where I’ve witnessed the same phenomenon. If you’re like me, you’ve got friends who purchase a new set of irons, or two, every year; are constantly trying new drivers, shafts, and wedges; and always have a new putter in the bag. My experience, whether a new shoe or a new putter, has always been an initial peak in performance, followed by a return to my personal mean. Truth be told, I’ve been tinkering with my own driver this year, and the experience reminded me of something Charlie Cook told me at dinner back in March. According to Charlie, whichever candidate the presidential campaign became a referendum on would lose the election. If the election were about President Biden’s age, his role in stoking inflation, and his record on the southern border, Trump would win. But if the election became about Trump’s boorish personality, January 6, and the former president’s legal predicaments, Biden would win. Even though the election was between presidents with actual records and policies to view, looked at another way, rather than a referendum on the past, I believed whichever candidate, Biden or Trump, could distinguish themselves from their past and offer something that at least appeared new and improved, the personification of my souped-up driver or new shoe, would win the election. Voters would “buy” them. Here, Trump was excelling. He was the candidate who looked energetic at the debate, reflexively fought back after an assassination attempt, and threw a near-perfect convention. Oh, how things change. With President Biden dropping out of the campaign and Vice President Harris entering it, there is suddenly a shiny-new candidate in the race and the shift in poll numbers reflects my hypotheses—Donald Trump is last year’s model, and Vice President Harris is newly off the assembly line, and voters are buying her. While the Vice President will have another opportunity to introduce herself as a fresh, new candidate at next week’s Democratic National Convention, the campaign will ramp up after Labor Day, and both candidates will have the opportunity to redefine themselves and each other. If Vice President Harris becomes the old anti-fracking, defund the police California senator, and inflation driving Biden administration border czar, she’ll lose; but if she continues to be viewed as a break from the past, she’ll win. Likewise, if former president Trump is viewed as the 78-year-old convicted felon who contested the 2020 election, he’ll lose; but if he can become the disciplined politician who survived an assassin’s bullet and offers tax relief to the middle class, deregulation to business, and policies to fight crime and protect the border, he’ll likely regain his footing at the top of the polls.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Observatory Group Says Geopolitical Risk Will Rise During Transition Regardless of Who Wins Election. Regardless of who wins the election—Vice President Harris or former president Trump—investors should expect an increase in geopolitical risk during the period usually referred to as the Presidential transition—from November 2024 and into 2025. The change at the top in the U.S. has a unique feature—a long transition period in which nearly all senior government leadership turns over, creating a temporary leadership vacuum. The U.S. is particularly vulnerable, both domestically and abroad, during this time. Although everyone in Washington understands the problem and knows it can impede effective decision-making on critical national security and geopolitical issues, history shows that new presidents often face immediate challenges from both state and non-state actors testing their resolve and decision-making in the early months of their administrations. It should be expected that this trend will continue, regardless of who becomes the 47th President. These two issues, a protracted transition and an early test of a president, increase already known geopolitical risks (Ukraine/Russia, Israel/Iran/Hezbollah, China/Taiwan). Not only do almost all the White House staff positions become vacant on Inauguration Day, but some leave their jobs early. Each presidential transition sees hundreds of senior government leaders across all departments and agencies depart with the outgoing administration. The process of filling those jobs takes time. Consequently, the incoming president hits the reset button, leaving federal agencies to endure months or even years of waiting for a new team of political appointees to assume their roles, pending background checks, a slow nomination process, and a Senate confirmation that is increasingly mired in gridlock. Adversaries will be assessing the vulnerabilities created by that process. Seat-warmer officials serving in “acting” capacities may be skilled and experienced public servants, but they lack the authority and full support from the new White House to take decisive action. The continuity risk will be different depending on the incoming President. Arguably, the risk should be less under a Harris administration as some Biden administration officials may agree to stay on to allow for a smoother transition. However, it should be expected that Harris would replace many senior administration officials in her first year. Obviously, Harris has less Oval Office experience than Trump and a thinner geopolitical resume, which might invite increased testing from both state and non-state actors. A Trump 2.0 administration would have a wholesale change of political appointees, which would compound risk and could include the possibility of a combative transition. Nonetheless, Trump is a former president, and adversaries may think twice before testing his resolve.
Trade Analyst Laura Chasen Explains What to Expect from Harris-Walz on Trade. Last week, Democratic presidential candidate Vice President Harris chose Minnesota Governor Walz as her vice-presidential running mate. While he is unlikely to have much influence over Harris’ policy positions during the campaign, or even if they are elected, both fit the mold of a traditional progressive Democrat, and so, their views on international trade are unlikely to differ significantly. To date, the Biden administration has taken an approach to trade congenial to the progressive wing of the party, and it is one with which Harris (and Walz) is sympathetic: tough on trade enforcement as well as “Buy America” rules, in particular to please organized labor (e.g., a “worker-centric” trade policy); opposition to new full free trade agreements yet focused on promoting U.S. exports; eager to use industrial policy to promote American manufacturing and advanced tech competitiveness; and a willingness to use trade as leverage for higher environmental and labor standards abroad. While “supportive” of the WTO, there is no indication that Harris would take a different approach than Biden on the Appellate Body issue or the use of the national security exception. Still, she’s big on working with allies, and her focus on de-carbonization might make her more amenable than Biden to a carbon tax, which could ease the way for working with the EU on a Global Agreement on Sustainable Steel & Aluminum, for which the talks are currently bogged down. While wanting to cooperate with allies, Harris is unlikely to want to ease up on China. Of course, what she will be able to do if elected will also depend on the composition of the new Congress.
“Inside Baseball”
Although Expenditures Typically Slow in Election Years as the Focus Shifts from Legislating to Campaigning, the Biggest Lobbying Interests Bucked that Trend with Higher 2024 Spending. Trade groups and companies responsible for this year’s largest lobbying expenditures have upped the ante in the first half of 2024 compared to a year earlier, defying expectations for an election year slump. K Street’s top 10 clients shelled out $162.3 million through June, up 13% from the first half of 2023. Part of that was due to heavy legislative activity during the first quarter, which saw enactment of two spending packages and House passage of a $79 billion tax bill that got hung up in the Senate. Topping the list are standbys that regularly populate the top 10: U.S. Chamber of Commerce; National Association of Realtors; Pharmaceutical Research and Manufacturers of America (PhRMA); American Medical Association; American Hospital Association; and Business Roundtable. All boosted their lobbying expenditures in the first half of this year above the same period in 2023. Changes to this year’s top 10 include the American Chemistry Council and AARP. Meta Platforms Inc., parent of Facebook and Instagram, pushed into the top five, wedged between PhRMA and the American Medical Association.
In Other Words
“I couldn’t be more surprised if I woke up with my head stapled to the carpet,” Minnesota Gov. Walz (D) on Vice President Harris tapping him to be her running mate.
Did You Know
Before serving as a member of Congress, seven legislators participated in at least one Olympics. Of the seven, three won gold medals—Bill Bradley (D) as a member of the 1964 basketball team; Bob Mathias (R) in the decathlon in both 1948 and 1952; and Ralph Metcalfe (D), who won gold in the 4 x 100 meter relay in 1936. Only one, Ben Nighthorse Campbell, served in both the U.S. Senate and House.
Graph of the Week
The Conference Board’s Measure of CEO Confidence* fell in Q3 from the previous quarter. While Q3 was the lowest reading in 2024 so far, the Measure remained above 50, indicating that CEOs remain moderately optimistic (a reading above 50 reflects more positive than negative responses). While views about the current economic situation weakened in Q3, CEOs remained cautiously optimistic about the future—especially compared to a year ago. Notably, fears of recession fell sharply. Other Q3 highlights:
- 70% of CEOs do not anticipate a recession in the next 12-18 months—up from 17% in Q3 2023.
- 29% anticipate a shallow recession, with limited global spillover—down from 80% in Q3 2023.
- Just 1% anticipate a deep recession, with material global spillover—down from 4% in Q3 2023.
Overall, CEOs say that conditions have worsened compared to six months ago, and a slight majority of CEOs (52%) expect one rate cut this year, up from 38% in Q2. The share of CEOs expecting two cuts also rose—to 38% from 26% in Q2. Only 7% expected no rate cuts, down from 31%.
*The Conference Board’s Measure of CEO Confidence is a barometer of the health of the U.S. economy from the perspective of U.S. chief executives. The Measure is based on CEOs’ perceptions of current and expected business and industry conditions, and it gauges CEOs’ expectations about future actions their companies plan to take in four key areas: capital spending, employment, recruiting, and wages.
