Featuring:
Matt Miller
Political Economist
Reagan Anderson
Senior VP, Government Relations
Will McKenna
Content Director
Will McKenna: Hello, and welcome to the Capital Ideas webinar series. I'm your host Will McKenna. I want to thank everybody for joining us today. Great to be with you.
And our topic today is geopolitics and the U.S. midterms. Suffice to say very hot topic in today's world. And we're going to cover your key questions including things like: When do we expect to see a resolution to the war in Iran? And what are the implications for the economy? What are the likely outcomes from the midterms and what does that mean for markets and maybe more importantly, your portfolios? So we're going to answer those questions and your questions over the next hour. We have two great speakers to help us do that.
Matt Miller is here. Matt is our political economist at Capital Group. He has 35 years experience, been with Capital for 11. Prior to that, Matt was a senior advisor at McKinsey & Company and also a senior advisor in the White House Office of Management and Budget. You may also recognize him as the host of public radio's “Left, Right & Center” program, which he now runs at Capital Group. It's called “Left, Right & Capital,” which we have at many of our events. He holds his law degree from Columbia and bachelor’s from Brown, and he is based in Los Angeles but joining us from New York today.
Reagan Anderson is Senior Vice President of Government Regulatory Affairs at Capital. She has 25 years of experience, been with Capital for 10 years. And prior to that, she has held a number of roles on Capitol Hill where she spends much of her time these days. She got a bachelor's in journalism from Ohio University and is based in our Washington, D.C. office. So welcome to you both.
And hey, one thing I want to remind folks on the line before we jump in. The views that Matt and Reagan are going to share here today are really all about analysis and not advocacy. And here I'm quoting Matt Miller. You know, look, I know people have a lot of strong feelings about this topic, but please do remember our job is to provide unbiased analysis without any kind of partisan advocacy.
So with that, Matt, I want to start with you. And I think the first question on everybody's mind is really about the war in Iran. So, how do you see that conflict playing out? And what are the lasting impacts on the economy and markets?
Matt Miller: Obviously it's the top of mind question, Will, and great to be with you and with Reagan and with our audience today. I think we have to have some humility about the unknowns, about where this is going to head. You know, there are scenarios where Trump will try and find a way to end hostilities sooner rather than later and strike some kind of deal. And there are scenarios where, even as soon as when he's done with this summit with Xi Jinping in China, which I know we'll talk about that there may be some resumption of hostilities because Trump is not satisfied with what the Iranian response has been so far to the U.S. positions on some of the essential terms. And, obviously, for markets and for the global economy, how long this lasts has a big impact. Our economists will tell you it's not just about oil prices and whether they settle back closer to $90 or shoot up to some much higher number than they are today. But it's also agriculture, chemicals, fertilizer, all these supply chains that have been disrupted by the closure of the Strait of Hormuz are going to have a rippling effect already.
I know my economics colleagues believe there's going to be some pass through to inflation already in the U.S., for example, just from the disruption in chemicals that we've seen related to the key ingredients and precursors to materials that are used in all these end products. So, I can't give you a firm answer today, Will, obviously, because it's a very fluid situation.
One thing I'll say is, one hypothesis I've had looking at us through a political lens and what Trump's incentives are, is, if he’s trying to, if one supposes he's trying to wrap this up sooner rather than later, at least this phase of hostilities, so that he can turn his attention to the midterms and focus on a tough battle for the Republicans as they head toward the November vote, we shouldn't assume that the war with Iran, kind of in quotes, is "over." I think there's a scenario where he tries to make some interim gains based on what's happened to date, tries to reach some kind of negotiated settlement that may last for a period. But I think we have to be ready that after November, when he still has two more years left, if you view him analytically as I do, who’s someone who views a piece of his legacy that he wants is to have dealt with the quote, unquote, "Iran problem," that there is a good chance that he will come back to quote, unquote, "finish the job" some time after the midterm vote. So those are some opening thoughts.
Will McKenna: Okay. Interesting. Doesn't have to solve it before the midterms, per se. And one of the terms you use was “scenarios.” And many of you on the call know that we use a lot of scenario planning here at Capital Group. You hear us talk about that a lot as opposed to binary predictions. And we may return to that concept as we go.
Reagan, you spend a lot of time on Capitol Hill. We’d love to get your view on the same topic from your lens there. How do you see the path unfolding and what's at stake for investors?
Reagan Anderson: Yeah, so from the policy lens in D.C. I think the key question right now is where the conversation goes on the U.S. dependence on oil production, right? I mean, this has been manageable so far because the United States has increased exports. And I think in Washington, sometimes these things, these things are always connected, I should say. They're never not connected. So, it’s fascinating to me that the president and the delegation of CEOs he took to China with him are meeting today. Yesterday, the House of Representatives voted for the first time, and it's been very controversial, to pass a bill that would allow for E15 sales year round. And why do I mention this? Because all of these factors are things that we're thinking about for end investors. And I think energy and oil production in the U.S. is a really key issue.
And I want to point out that, this is what when you think about politics and the political lens on all of these geopolitical issues, how does it come back to the constituents that have voted these members of Congress into office? How does it affect their jobs? How does it affect their local economies? 21 states in the U.S. produce E15, right? So, the vote yesterday was almost a pure split. 122 Republicans, 95 Democrats, one independent, voted for this bill. And I'm offering that as a starting point because I want to keep the focus today on all of these issues. How do they then come into the political conversation in Washington? And how are these policymakers thinking about it? We've said it before, Matt, I'll say it again, all politics is local. And this is a perfect example of one of these issues that will trickle down to consumers, trickle down to constituents and investors, and only time will tell how much pain we feel from this. But energy production in the U.S. is a very, very localized issue and a very controversial one for policymakers to navigate.
Will McKenna: That's a great point, Reagan. And to your point, I think we will be getting into gas prices at the local level and many of those issues that are much on the mind of constituents as we dig into the path to the midterms. You both mentioned China and, obviously, President Trump and Xi Jinping are meeting literally as we speak today. Matt, why don't you start us off on this topic? Maybe, what do you expect to come from these discussions? But maybe more importantly, set the context for us a bit. Where does this meeting stand in the arc of the ongoing U.S.-China relationship and where do you see it going from here? Is this a step in the right direction or not? How are you framing it? But first, what's going to come from this one?
Matt Miller: This is, it’s obviously the most important geopolitical relationship in the world. It's something that, the competition between the U.S. and China is going to shape the rest of the investing lives and lives as global citizens of all of us on this call. I think the main theme that we should expect from this week's meetings is a kind of search for stability, a kind of truce. I think both sides have incentives to not rock the boat much and to find a way to have a stable equilibrium over the course of the next few years, so that each side can try and bolster its own strengths and address its own liabilities in ways that position it for the longer term kind of competition.
The most important thing, which doesn't get headlines all the time in all the different stage setting pieces that you see in the U.S. press about Trump's visit over there, the key thing that Trump has to emerge with is a continuation of access to the rare earths, minerals, which China has an almost complete monopoly on. Not just the mining, but the processing of those minerals, without which American industry and much of global industry cannot function. You know, it's a longer discussion, which the administration spends times talking about, on how the U.S. over a series of administrations led by both parties over the last 30 years allowed the U.S. to become entirely dependent for a key ingredient of the modern economy on what's become America's chief geopolitical rival.
But that means ever since President Xi played that card in response to the president's tariff actions in his first year, Trump and the administration have known that they can't allow that to happen. And that means that, ultimately the leverage or pressure points that the U.S. has, even though the U.S. has many things that China wants, they can't put at risk the continued access to the rare earth minerals from China. And so that's the most important thing that will come out of it. I assume there's also going to be deals announced with lots of Boeing purchases, and beans, as our colleague, Tom Cooney, had called it. He had a “Boeing and beans” line for trade deals we should expect.
And a kind of good feeling I think on both sides about the ability to do business. The warning we've seen already about Taiwan being the red line and the most important issue for China. But I think the real theme is a kind of mutual respect and stability that both sides are seeking while each tries to bolster. China tries to become more autonomous on the advanced chips that the U.S. is withholding. The U.S. tries to build up its resilience and autonomy of the supply chains that serve the American military and medical, and other supply chains, and a chance to come back and quarrel another day, as it were.
Will McKenna: Yeah, it's an interesting point about the rare earths. And we've seen sort of a broader theme around, call it “choke points,” whether that's rare earths, the Strait of Hormuz, the Nvidia chips. So that seems to be playing out in a number of corners.
Reagan, help us understand your perspective. You're there on Capitol Hill. How are you thinking about this meeting between the two powers and maybe the context of that within the broader U.S.-China relationship?
Reagan Anderson: Yeah, thanks, Will. And actually, Matt, can I add one more “b” to you and Tom's phrase? It's “Boeing, beef and beans.” I think the beef industry for those rural states in America are really, really going to be hanging on what happens after the photos, after all the statements come out of this meeting. What's next? To this point of what is the long-term relationship for this huge global power? And I agree with everything that Matt said in terms of both nations have a lot to gain and a lot to lose.
One thing though that I think is important just to share, Will, is that from the D.C. perspective, I really feel like some of the China hawks have softened a little bit. And in just the regular conversations in the hallways now, it's really shifted to more of a, “how do we manage the rivalry so that we can both win, so that we can both be dominant, so that we can both provide access to consumer goods and services that we're trying to do?”
And it was very telling too to see the president invite those handful of CEOs to go with him to Beijing and ride on the plane with him and send the message that we are open for business. I thought that was probably one of the key factors in this visit. And then I was reading some of the coverage just this morning, and we've invited the Chinese delegation back to the U.S. in September. So, I think that's a good sign. But like I said, let's take a minute and see what happens after all the photo shoots are finished and all the social media posts and see how this plays out. But I am cautiously optimistic that we get some relief from some of the impact the tariffs had on communities across America.
Matt Miller: Hey, Will, can I add one last point just for-
Will McKenna: Oh, please.
Matt Miller: One thing we're watching also is China's quite upset about the arm sales that the U.S. does to Taiwan. And it'll be interesting, there's been some speculation that Xi Jinping will try and send a signal that he would frown on certain sales of certain equipment to Taiwan and try and use his pledge to make visits later this year to the United States conditioned on that not happening before he was making such visits, as an attempt to influence the timetable and what has been the traditional autonomy of the U.S. dealing with China directly. And one can understand why China would take that position. It'll be interesting to see how that turns out or how the president responds if that's what's proffered.
Will McKenna: Great point. Okay, awesome start. I want to go ahead and pivot to a couple of other areas, and we'll dig into the midterms. But let me do two things first. First, I thought I would give the audience a little bit of a behind-the-scenes view into our process. Matt is part of a team here called Capital Strategy Research that we call CSR. It’s really our team of economists around the world. And on Mondays, they host a call for all the portfolio managers and analysts, and even people like me get to join in and listen to that.
And just to give you a sense of how that unfolds, this past Monday, we had a China specialist to talk about the summit and provide their expertise on it, and also a retired general and admiral join to give us real-world insights into the realities behind opening the Strait of Hormuz and what that might really take from an operational perspective.
So, really fascinating stuff, not the kind of thing you hear in the media every day. And suffice to say, that we're trying to tap into the best thinkers in the world on these to inform our investment decisions. So, Matt, I don't know if anything to share on that, but I know we had a couple of hundred folks from the investment team on that call, but very helpful part of the process.
Matt Miller: Without speaking out of school from folks who are speaking confidentially, talking to some of these military experts is just very helpful in trying to calibrate what the dimensions would be of different scenarios of a potential conflict.
And then in the kind of classic Capital way, each portfolio manager and investment analyst kind of takes that on board into their own portfolio decision making in ways that they think makes best sense for clients and for shareholders.
So it's different than just watching five minutes on a Sunday morning news show, but it's a chance to dig deep and ask a lot of questions with folks who literally have had traversed the Straits of Hormuz dozens and dozens of times in their military career and know the challenges and also the possibilities for what may unfold.
Will McKenna: Yeah, absolutely fascinating. Okay. Now it's time for a little interactive portion of our event with those of you in the audience. And it's our first poll question for you. Here we are, it's mid-May, so we're thinking about summer travel. Anything fun planned out there, folks, in terms of your summer vacation destinations?
I know I'm excited to get up to the Deschutes River up in Oregon here pretty soon and try my hand with the trout. But let us know in the comments what you're up to this summer, and we'll circle back and read some of those as we go down the path. Okay. Let's pivot now to talk about the midterms and maybe just start out with some of your big-picture thoughts. Matt, we're about five months out. What are your expectations for how this cycle is going to unfold?
Matt Miller: Well, everyone knows that traditionally, presidents, the party in power, especially when they've got all three, the House, Congress, and the presidency, tend to face setbacks in the midterms. I guess if I had to say today, I would say the Democrats have an edge, but I've always thought it was going to be closer than I think the consensus expects. I was looking at some of the prediction markets before we got on the call. They have the odds of the Democrats winning the Congress at like 75%. I think that is way overconfident from the Democratic side, not only because of some of the redistricting stuff underway that I think Reagan will talk about, because she's got real expertise on that. But I think, again, this is analysis, not advocacy.
I have a exceptionally high regard for Trump's political skills. And when he turns his attention to trying the win in the midterms, and remember, we're still way out. Five or six months is a lifetime in politics. I think he has a extraordinary ability to make the election about what he wants it to be about. He obviously is facing serious headwinds on the cost of living. His poll numbers are terrible, his rankings on the economy, et cetera. All these issues that were deemed to be his strengths and helped him win in 2024 are underwater. But at the same time, the Democratic brand is terrible. And the favorability rating of the Democratic Party is worse even than the Republican Party, which is at lows as well.
And so, there's an argument that Democrats are overconfident and I think that Trump will... because he will do everything he can to close the election in the final months on the issues where he wants to draw very strong contrast with what he will argue are kind of extreme positions on, not just on core positions like taxes, but on immigration, on military strength, on patriotism, on the culture war issues. We will see an enormous amount of energy and well-funded advertising and firepower that I think will make this closer than folks expect, and even given the Republicans a chance to each eke out what today would be a surprise win.
Will McKenna: Very interesting. So maybe it doesn't look great for the Republican Party today, but you sense that there's an overconfidence there, and perhaps it may be closer than people expect. And as I've heard you say before, five months is a lifetime in politics, so a lot will unfold between then and now. Reagan, you've got kind of an inside view there on the Hill in D.C. How are you seeing this play out? What's the mood as you walk the halls of the Capitol and what's your take?
Reagan Anderson: Yeah, I think two things are top of mind for the D.C. inside gang, so to say. And I would say the redistricting that was mentioned, but also the retirements, right. So this is changing. I mean, if we did this webinar in two months, to Matt's point, five months is a lot of time, but if we did in two months from now, we might have different information even on the redistricting. So, we don't like to speculate a lot, so I'd like to just stick with what we know today, going into this. I think the biggest takeaway for me, just on early polling right now, is to what Matt was saying.
The issues that are coming up are affordability, number one, absolutely inflation, the cost of living, food prices, housing. Affordable housing has been an issue now for years and there's not been any sort of solution at the federal level. That might change, right. I mean, all of these things are happening live as we're living this day to day. Healthcare, immigration, just general government competence is an issue that's polling pretty highly with voters right now. And I would say the other big takeaway I have is the Republicans really wanted to run on the Big Beautiful Bill from last summer, right?
They really wanted that momentum to go into 2026, into the midterms. I think that they put a lot of eggs in the basket of Americans were going to get higher tax refunds in April. And now, again, that's a long time to November. So they might've put too much weight on that. But it's interesting to me when I look at the polling and see that the taxes and the foreign policy are really secondary issues. And it's those straightforward kitchen table topics that are driving polling. And also, I know we're going to get into it, Will, but the redistricting.
We had an election in Virginia a couple of weeks ago, and I went to look and see what the turnout was, and it was 50% of registered voters. And it was interesting to me to see that that many people came out specifically to cast a vote on the Virginia redistricting, which, of course, has been overturned in the court, but this is a big issue that's bringing people out. So yeah, lots to unpack, lots of time and I'm happy to go into those redistricting and retirement points too, wherever you want to take us.
Will McKenna: Okay, that's great. And I'm glad you brought up all those retirements. Folks may not have been tracking that as closely, of course, as you are. And I didn't realize that 50% of registered voters. So there's a lot of energy behind this topic. I'm going to pivot there in one second. Let me just thank the audience for so much interest and fun ideas coming through, and I won't get to all of these, but here's what I heard in terms of your summer plans.
Dublin, which is great. Green River in Utah. I think somebody offered to let me stay at their house in Bend. Maybe connect with me on LinkedIn if that was the case. Several in Alaska. Somebody's going to Paros, Greece. That sounds fabulous. Maui. Glacier Park. Lipari Island. I don't know what that is, but that sounds exciting. Here's a favorite: Philadelphia for the 4th of July.
That sounds like a great place to spend that weekend. Musky fishing in Canada. And the list goes on. Thank you for that. Always fun for us to hear those ideas and keep them coming. Yeah. So, Reagan, let's stick with you and talk about redistricting. That's definitely front and center right now. How do you see all this playing out? I guess not only this year, but it will probably last through to the 28th cycle. But what's your perspective on this? How should we be thinking about it?
Reagan Anderson: Yeah, so it's really been fascinating to watch, and we've been tracking it very closely. And going back to talks that Matt and I've done over the years, we have pointed out the importance of paying attention to what's going on in local politics, right? Because these state Houses as they became bluer or more red over the years has really brought us to the point we are today where they, along with the Supreme Court ruling on the Voting Rights Act, which really put a lot of momentum behind this, have the ability to redraw these congressional districts at the federal level.
So, yes, we've been watching this for a long time. And let me just give you some of the numbers because, like I said, this is changing, but for the impact to this year's midterm election, 2026, redistricting has already created 21 new seats. 15 are solidly Republican. Two in Ohio, five in Texas, one in Missouri, one in North Carolina, four in Florida, one in Tennessee, and one in Alabama. Recently, the State of South Carolina was meeting to vote on whether they would eliminate the one Democratic seat in their delegation, and it did not pass, but the governor's going to bring it up for another consideration. So this is a very fluid process right now.
It is interesting also to watch that we will have states that are completely... I'm not talking about some of the Western states that have one seat, but with multiple congressional districts that will be completely controlled by one party, right. Alabama. Maybe South Carolina. Tennessee. Georgia, and that's interesting too, because Georgia is a state that the president often takes to his public complaining about, but they have decided to wait, or they did decide to wait. And then I think it was just yesterday announced a special session to possibly reconsider their district maps before a June primary. And Democrats gained seats in California. Five there. One in Utah.
This redistricting really does matter. And I do think that Democrats have a lot of momentum going into this election, but the numbers are what they are, right? Republicans have gained 15 seats. If you think of the 435 congressional districts across the country, I've only got about 20 on the list that I'm paying attention to because we've gerrymandered so much of this map. If you look at it, I know we've got it somewhere, but it's really red states, and then it's blue urban areas on the coast. And this is what's happened over the years. This is just what gerrymandering congressional districts has done. So when I look at these races, Will, and I think about those that I think are truly toss-ups, I've got 14 pickup opportunities for Democrats. So this is going to come down to the wire in my view. Now, I hate to predict because I was wrong in the presidential. I was giving the advice of, “drink some coffee because we're not going to have results until late,” and then it was over before we knew it. So please take it for what it's worth because I was wrong last time. But on these House races, I do actually think it's going to be closer than... And I'm interested, Matt, that you check the prediction markets. I need to start doing that myself. Anyway, for this 2026 midterm, just from these numbers of redistricting, I think it's going to be pretty close. The money going into politics is wild. I've never seen anything like it.
And I know I've said that before because the crypto industry and everyone involved in digital assets put so much more money in politics than we'd ever seen before, and there seems to be an endless bank there. So, watching a lot of these races very closely, I can go down and give you some examples, but I don't know how interesting that is. But again, of the 20 or so toss-ups, I see 14 Democratic pickups. I think six of those 20 lean Republicans. So when you start doing the math, it could be really close.
And I guess my last point I'll make on that, and I've said this before, is I do actually think that Congress represents the American populate. It's very divided. We live in a very divided country right now and there's always a little bit of disconnect for me too on that because when I talk to friends, so putting aside, if I'm in meetings on Capitol Hill,
but if I'm on the sidelines at the soccer field in Alexandria, Virginia on the weekends, I don't get the feeling that people are really dug in, but the reflection in the voters and then who they're electing to come to Congress is very divided. So, to me, I see the disconnect there. So that's the redistricting math for today.
Will McKenna: Okay, that's great. And one of the questions that had come through is, “will the redistricting efforts be enough to offset the expected Republican losses?” But it sounds like what you're saying is “it's going to be close.” We may not pin you down, as you say, to an exact prediction, but if I hear you correctly, it's maybe closer than folks expect. Matt, take it away. What's your take on this issue? Anything else to add as you see this unfold?
Matt Miller: I guess the one thing I'd add is given what's happening on the redistricting, and if you think that my premise turns out right that Trump will not go down without a fight and make this closer than people expect in addition to those kind of structural changes Reagan laid out. If it comes down to a few seats and if those races are close, we could see litigation and contested races. And so it is possible that we don't know the result right after the election. I think we know we're in an era now when challenges to elections and contestations over power, when either party has a chance to pursue them, they will pursue them.
I was wrong last time also speaking of the '24 presidential race. I thought it was going to be close enough that I was preparing… I had booked for that macro call that you discussed, I had booked one of the leading Republican election lawyers in the country for the Monday after the election to take stock of where the litigation was, assuming that was going to be the post game after the '24 election. That was wrong. It turned out to be, whatever your view on who the winners and losers were, it was an excellent thing for markets to have certainty so quickly after the election. Could we have a period now where control of the House ends up contested for some period after the election? I think you're hearing us saying it's not impossible. Not to put words in Reagan's mouth, but I think it's a scenario we have to have in mind.
Will McKenna: One of the things I'll just reiterate, and I want to raise this for folks, again, this guide to midterm elections. One of the points we share in here, with a look back at 50 or more years of history, is midterm election years tend to be more volatile in the markets leading up to that period in November. But often you've seen markets really rally much more than in other years after that. And so I think some of the takeaway is, and probably what you're hearing from these two is yes, it may be time to expect more volatility leading up to that, but stay the course and you could be in a good position after.
Well, let's go ahead and maybe we assume there will be more of a split government. And in that situation, take us into your thoughts about where things go in terms of likely policy priorities and what that means for our audience. I don't know, Matt, you want to kick this one off assuming either do the Democrats take the House, I guess, and/or the Senate, which is a more difficult possibility?
Matt Miller: Yeah, for these purposes, let's assume Democrats take the House. I think we'll see two years of impeachment and investigations to start. Even though there are some voices in the Democratic Party that don't want to go through an impeachment, I think the energy around fighting Trump will lead to an impeachment. Not a conviction because even if the Democrats won the Senate, which I think is lower probability, they wouldn't have the two-thirds who need to convict, but there could be impeachment. And the most important thing for Democrats is they'll have the power to do oversight and investigations because they'll have the gavel in the House, and you'll have investigations of anything you can imagine, of arguable abuses by Trump of power, corruption as Democrats would argue and the way his family, in the view of critics, is profiting from his public service and his positions. You can just imagine a series of investigations that they will also use to try and dominate the headlines and seize control of the news agenda from Trump, something he's very sensitive to because he's been so effective at controlling the news agenda.
I do think there'll be a ton of, again, from the House, assuming it's just the House, the Democrats will pass a lot of what you might think of as messaging legislation, trying to draw contrast between the parties in the run up to 2028 to shape the presidential campaign, to stake out what Democrats think reflect their values on expanded access to healthcare or lowering costs in various ways, things that will not become law because President Trump won't sign them. And if you still have a Republican Senate, they won't pass them, but will set the terms of debate for 2028. And that happens whichever party is in a position to do that. Headed up to the next election cycle, that's what they would use their power to do.
I do think it's not impossible. I'm trying to think now, just to talk to our team about, are there areas of potential bipartisan cooperation, unlikely as that sounds in our polarized environment, where some things could be done even under a divided government? A couple just early hypotheses or things I'm doing more work on. Is there a way that further drug price controls, kind of a next installment of drug price controls on top of what Biden had done? Clearly the Democrats have a further agenda on that. Trump, as you know, has always talked differently than any other Republican president we've had about his desire to control drug prices and bring the industry more to heel. Is there a way that he would just be willing to accept something like what the Democrats are proposing? It's a question mark. Obviously has impact for the potential impact on the pharmaceutical sector, so it's something I'll do more work on.
Also in healthcare, there was a big fight, you remember, over the enhanced subsidies that went away for the Affordable Care Act, for Obamacare. Democrats, if they win the House, are obviously going to come back and try and push that. Is there a way that there'd be some deal on that, including some reforms that Republicans have long wanted in the Affordable Care Act program? Maybe it's an area. Is there something they might come together to do on housing? Again, something I'm going to do more work on. Even a tariff rebate. Is there some way, if Democrats want to push the idea, of giving some relief, they would argue, to average citizens based on the extra costs they'll say have been incurred because of tariffs? Would Trump just say, "Yeah, I'm good with that"? So, there may be some surprising things that are areas even in a partisan moment, that show some forward motion on legislation, which could impact asset values. And that's kind of at least a sketch of some of the agenda I'll be working on in the months ahead.
Will McKenna: That's a good example, I think, Matt, of what we were talking about earlier, which is thinking beyond the horizon a bit beyond November and thinking through, again, scenario planning as you lay out, because that can have an impact on how our portfolio managers are thinking about opportunities in the areas that they cover. Reagan, how are you thinking about this, both in terms of the likelihood of Democrats taking the House and/or the Senate? I know that's a more remote possibility, but how do you see that unfolding and then what will come from that?
Reagan Anderson: Yeah, so I'll just kind of lay out the Senate a little bit because I feel like we've spent some time talking about the House and I just think it's going to be close. The Senate's going to be interesting to watch as well. Again, it's a solid map for Republicans, so to say. They are defending 13 really red safe seats that they do not have to worry about. They do not have to put a lot of money into. And then there are five pretty likely Republican seats, but we're going to watch really closely to see what happens. Texas, Nebraska, Montana. Iowa's interesting. It's getting very interesting there because there's also two House races that are going to be toss-ups in my view. And then there's Florida, again, just on the radar to keep an eye on.
And the Democrats only have to defend five seats, which gives them a funding advantage. So, what you're going to be hearing about between now and November are the toss-up races. Those are the seats that are going to determine who controls the Senate. There's going to be a record amount of money spent in those Senate races. I think each one is truly a toss-up.
Two Senate races that I'm going to keep a close eye on too, even though I think they lean Republican, are Ohio and Alaska. In Ohio, it's an interesting race because the current Senator, Jon Husted, is running against former Senator Sherrod Brown. And Sherrod Brown is a true retail politician. He had a lot of seniority when he was defeated and left the Senate. But he's also a populist Democrat who I think could see some common ground, and this is wild to say, but some common ground with the administration and with President Trump. And to some of the things that Matt was talking about, one of the things that I spend as much time on as I do thinking about the election is, what is the composition of Congress afterwards? And particularly, what is the composition of the Senate where most legislation still needs 60 votes to pass?
And what's interesting, when I looked at just the Republican Conference going into the new Congress next year, depending on how some of these races shape up, there could be a pretty even split between Republicans who came to the Senate before and after Trump's election in 2016. I think that's going to be an interesting divide to watch because of all of the issues that have divided the Republican Conference so far. Retirements are big. Retirements are a big deal too, especially when we've got as many as we do in the Senate this year. Six Democrats are retiring, eight Republicans are retiring, including Mitch McConnell, who's been around for a long time and has always been seen as the mastermind behind Republican strategy in terms of the floor procedure and policy. So, there's just so many fascinating components to watch as things play out in the Senate.
And I will mention because we didn't, Will, there have also been 58 retirements in the House. That's a big chunk of members to leave the House of Representatives in one year. I think it might be a record number, I need to double check that, but that's a tremendous amount of education and relationship building that walks out the door.
So, the one area I'm going to watch for, though, in the scenario where we have divided government, is going to be tax policy. I actually listened to and was pleased to hear that Richard Neal, Congressman Richie Neal from Massachusetts, who would be the chairman of the Ways and Means Committee in the House, the primary tax writing committee there, he would be the chairman if Democrats take the House. And he said, "You know what? I'm not going to waste my gavel, the time that I have that gavel on trying to get Trump's tax returns, which is what I did the last time. I'm going to really think about some of these areas where we might actually be aligned with President Trump and try to get a small tax bill through."
And if I could make one prediction, it would be, knowing these two members of Congress and having worked with them for over 20 years, the chairman of the Senate Finance Committee, if it remains controlled by the Republicans, and if it is Richie Neal, if you put them in a room alone, they could hammer out a tax deal because they both are very committed to longstanding bipartisan tax policy. That's what we've been so privileged to be able to work on in terms of our advocacy in Washington for Capital Group, the retirement policy has been bipartisan. It might end up in a year-end reconciliation bill because it needs to go through a bigger package. But the heart of the retirement work that those members have done over the years, they've been committed to keeping it bipartisan.
And on both sides of the aisle, I think members are going to want to show that they can get something done in divided government. It has happened before. But if I was focused on some of the tax “loopholes,” so to say, that Trump has been pretty public about saying he wants to close, I would be focused on that and I'd be sitting in the halls of Congress right now trying to figure out what the pathway forward on that is. But given the number of issues that never were dealt with in the One Big Beautiful Bill last summer and just the dynamic of these particular policymakers, I'd be paying very close attention to tax policy next year.
Will McKenna: That's interesting. I didn't realize there was so much going on, potentially happening in tax policy, and it's nice to hear some of your optimism that some of that could get done in a bipartisan way. Let me stay with you, Reagan, because I know you do spend a lot of your time on Capitol Hill advocating for issues that are important to investors and our clients like those on the call today. Take us inside that process a bit. What are the, obviously taxes, but what are the issues you're focused on? How are those discussions with lawmakers going?
Reagan Anderson: Yeah, so this is a two-part question in my mind because we have a very robust agenda in Washington right now with the policymakers on the Hill and in the administration. And one thing that has been very clear to me in this current administration is that there are deadlines put on really big, tough, meaty bills like the tax bill last summer that, instead of just hitting pause and saying, "What is the policy behind what we're doing? What are we really trying to achieve? And is this bill we're writing going to achieve that?" we want to hit the deadline.
So, for example, I've mentioned the Big Beautiful Bill several times. President Trump really wanted that bill on his desk so he could sign it on the 4th of July. Did they rush it through? Yes. Was there committee process? No. Did members feel like they got a chance to vet issues and priorities that were important to them? No. Did Vice President JD Vance have to come in and be the deciding vote to get that across the finish line with Republicans controlling the House and Senate? Yes.
So, in this rush to get things done, the only way I've kind of made sense of it in my head is this administration wants an on-time departure. And even if all the parts of the plane aren't there, they're going to make sure it takes off on time. So, that's oversimplifying what was a much more complicated process, I know, but the instinct now is to go with the fastest, cheapest, easiest solution, right?
And that's not what's always in the best interest of our investors. We're long-term investors. People who trust us with their retirement savings in our American Funds are long-term investors. So, some of the policies that we've seen coming out of this administration and this Congress don't reflect that view. And it's been a tough pill to swallow, so to say, because the talking points that we get from them are about creating lifelong investors. Showing young... The baby bond issue that turned into Trump accounts in the Big Beautiful Bill last summer, that was something that was rushed through and we do regret that that's going to be limited to passive products. And we think that that is not in the best interest of investors long-term. And certainly, if you want to instill this notion of compound interest and growth long term, I think that's a little shortsighted.
So, we're spending a lot of time because we're seeing that policy, Will, show up in other places. And this conversation going on frankly with people who do need a lot more education on, “What is active management? What is passive management? What is an index fund?” I mean, that kind of work is what we're doing day to day on the Hill, because we've had so much turnover and we have so much turnover in congressional staff who are advising the members that they work for on these issues.
On the regulatory side, the other bucket of work that we do, it's actually been a very productive time, I will say. With Republican control of Congress, it gives us the opportunity to look at the regulations that impact our investors day to day. The SEC is committed to a series of small improvements, modernizations, I like to say “rightsizing” regulation. Because when regulation is done right, it benefits investors, it benefits markets.
When there's overreach, it creates unnecessary complexity, which creates more cost, which ultimately investors pay for. So we've done a broad scope of everything that we could, like, pinpoint. Some of these issues we've been working on for years. But with the new leadership at the SEC and other agencies in Washington, we’re really taking a fresh look and doubling down on those efforts to try to rightsize and modernize those regulations, they're in the best interests of our shareholders.
Will McKenna: That's pretty crazy. Thank you for all that. And, Matt, I may come to you with a few lightning round-style questions and let you pick and choose what you want to touch on before we get into some of our closing thoughts. And let me put a few of these out here. There's a few questions about the Supreme Court and all the activity that's been going on there. I know you have some interesting perspectives there.
John asked the question, "What are the top three or four factors that have caused the electorate to become so divided?" Matt asked the question, "Are you expecting a pullback in stock prices this summer as our historical chart suggests?" But any of those you want to touch on, Supreme Court, “Why are we so divided, and/or will we see a pullback this summer?”
Matt Miller: I think I'm not our guru on the pullback question, so I'll leave that one aside. But on the others in lightning-round fashion, the Supreme Court case that I'm looking at most that I think could actually have impact on the midterms is the birthright citizenship case. People recall that Trump issued an executive order changing the rules on birthright citizenship so that what he was proposing was that the children of people who are not here fully legally would not automatically become U.S. citizens, which is long thought to be what the standing Constitutional view is, or holding, in the U.S.
My strong assumption from the legal gurus I talked to and listening to the arguments at this court recently is that Trump will lose that case, perhaps 7-2 or 8-1, because the Constitutional Law seems to be clear. However, I think that he may find that, and I know these are sensitive issues, birthright citizenship affects lots of families, including families at Capital and folks we serve. But just as a strictly political analysis, I think that Trump may seize on a loss at the court on birthright citizenship as a kind of political blessing in disguise because it would mean that he needs to amend the Constitution to do what he would want to do.
The truth is, although, again, as analysis, not advocacy, I often tell colleagues that if you're just reading CNN or reading The New York Times, you would think that what Trump was proposing was out of step with all advanced nations. But that's not the case. Many, many wealthy, if not most advanced nations, don't do the birthright citizenship the way we do. Some do, like Canada and Mexico. It tends to be in the Western hemisphere. But the U.K., France, Norway, Sweden, many of the big countries do it differently.
And if Trump proposed a constitutional amendment, not because he thought he would get one, but because he could put it at the center of the debate in a way that he needs an immigration issue, he wants immigration issues to close the campaign on, it might be a kind of surprising vector that's not on the screen today that would be a way he can get that issue elevated in voters' minds before he goes to the vote. So just something to keep an eye on.
And on the divided governance, I mean, the divided nature, I think that the forces at work that led to this, preceded Trump and will outlast him. Speaking briefly, Democrats are very frustrated about what they see as the structural impediments to majority rule in the U.S., the structure of the Senate and the Electoral College. And that's increasingly frustrating to them. The fact that Trump won the popular vote last time may be an anomaly. If Republicans were to hold the House this fall, it would almost certainly be at the same time that they lose the congressional vote nationally by perhaps four points. That will be, again, a source of enduring frustration to the Democratic side.
And on the Right, there's a deep concern about the pace of demographic change in the U.S., the sense that the Democratic Party, in the Republican's view, is trying to accelerate that demographic change in ways that lowers the status and prospects of more traditional white Americans in the working class. And that's why so many of them have switched to the Republican Party. And those things, again, preceded Trump, will outlast him longer than you wanted, Will, but just the forces at work that folks might consider.
Will McKenna: That's very helpful, thank you. Well, let's pivot now to some of our closing thoughts. We like to inject a little more lighthearted topic here, which is book and podcast recommendations. Would love to hear from the two of you if you have anything on your nightstand or in your podcast app these days. Reagan, why don't you start us off?
Reagan Anderson: Sure, so I'll start with podcast. Ben Sasse, some of you may remember, was a Republican senator from Nebraska. Really, really great policy thinker, have tremendous respect for him. And he has a terminal diagnosis of pancreatic cancer, which is really very sad, because he's young and he has a young family. He started a podcast called “Not Dead Yet.”
And I appreciate that in his final time he's willing to do this and to bring people in to hear their stories, about issues that families across America talk about, but maybe politically have become tougher issues in recent years. And I just have enjoyed his perspective, and I just can't say how much I appreciate that he's taking time to do this and to have opportunity for people like me to hear the wisdom of those who have started businesses and raised families. So that's my favorite podcast right now.
The book is a little different recommendation than I usually make, but I did just finish it and it's in the same theme, and it's a book called “Theo of Golden.” It's one that I think a lot of people have read or are reading by Allen Levi. And it, for me, the biggest takeaway was we'd all be a little bit better off if we'd listen more and talk less, which is funny that I'm saying that after participating in this conversation. But I took a lot from that book, and I am going to give it to anyone who's willing to read it this summer. Because I think there's a lot to take from it. Thanks, Will.
Will McKenna: That's great. And somebody, Patricia, in the comments had already written “Theo of Golden” in there, but also that Ben Sasse is really wonderful. Matt, what about for you? I know you're a voracious reader and probably podcast listener and speaker, but what's on your list?
Matt Miller: First, I didn't know Ben Sasse had started a podcast. I've seen some of his stuff on “60 Minutes” and others, and, like Reagan, I really admire how he's using the time he has. And I'm certainly going to check that podcast out. I want to toss in a restaurant recommendation, if that's okay because someone said they're going to Dublin, and I was not able to go to a restaurant called Assassination Custard, which is a phrase from James Joyce. It only holds about six people. I was there with my daughter last summer and could not get in because we didn't know about it until we were on the ground. So whoever's going to Dublin, I urge you, it's a hot little place.
The book is “Napoleon,” which is a short history of Napoleon by the late British historian, Paul Johnson. About 180 pages. He's done a series of these short lives. And, strangely enough, as Will knows, we've been thinking about Trump's view of himself as a kind of world historic figure. And so I was trying to get smarter on world historic figures like Napoleon, who I did not know much about. Fascinating read. Really worth it. And I'm not sure Trump is Napoleon, but it does lend some insights into people with these kind of vaulting ambitions who come to lead countries.
And not quite a podcast, but there's a YouTube show that I really recommend for people following politics if you want a balanced and really smart take on this stuff. One is called, they're both by a broadcaster named Mark Halperin, who's written books. He's come back in the last year or so with an offering called “The Morning Meeting” and the evening companion to that, which is “2WAY Tonight.”
What's interesting is it always has a Republican and a Democratic voice as they go through the news of the day and what's ahead, and they also, half of each hour show, is devoted to viewer participation, asking questions of the experts and political leaders they have on the show. So you get to see real people's thinking across America, or at least those who self-select into this group in a way, I find very useful for the work I do and that folks might find useful to tap in if you're a political junkie like me.
Will McKenna: Man, that might be the best list from the two of you that we've ever had on this show. And certainly, Assassination Custard is the first restaurant recommendation. Man, I hope you all in the audience are as thrilled as I am about that. Let me just repeat some of this. The Ben Sasse work, which has really been compelling and moving. “Not Dead Yet” is the name of his show. “Theo of Golden,” “Theo of Golden” was the book that we talked about. Assassination Custard. A book on Napoleon that our friend Matt is reading. And then Mark Halperin's podcast. Very interesting.
Well, I'm going to close this up there. Before we do sign off, I want to remind folks, please do mark your calendars for our next webinar, which is coming up on June 25th. That's going to be all about our Midyear Outlook. I want to thank everybody. Great questions and comments. Sorry we didn't get to everything. I know we had some of our private client services folks out there, great questions from them as well. Tried to weave some of that in. And one of the ladies out there and others and mentioning cherry blossoms in D.C. at this time of year, Reagan, of course. Because of you all in the audience, we've been voted number one for thought leadership for the sixth time.
And finally, let me thank these guys for their great insights. One of the things that did come through, and I've got to get better at using this prop because I really love doing this, but I'm not very skilled at putting it in front of the camera. Somebody asked, "Was this filed for public use?" The answer is yes, it is filed for public use, so please use that as you see fit. Let me thank Matt and Reagan for your great insights. I hope all of you found this as interesting as I did. Thanks again and enjoy the rest of your day.
1 hour CE credit for CFP and IWI*
Geopolitical conflicts and election cycles often dominate headlines and drive market anxiety. But history shows markets may be less susceptible to politics than many investors assume.
Join political economist Matt Miller and Senior VP of Government Relations Reagan Anderson for an engaging discussion on the upcoming U.S. midterm elections, global conflicts and what it all could mean for your portfolios.
Earn CE credit and gain practical insights to help make sense of politics, policy and markets.
Event date:May 14, 2026
Matt Miller is a political economist with 35 years of experience and has been with Capital for 10 years (as of 12/31/2025). He holds a law degree from Columbia and a bachelor's from Brown University.