The Conning Commentary: Special Election Commentary

November 14, 2022

By Scott Hawkins, Managing Director and Head of Insurance Research and Richard L. Sega, FSA, MAAA, Global Chief Investment Strategist


Conning is providing a special election edition of its monthly Conning Commentary to highlight key issues we believe will affect the insurance industry resulting from the election outcomes.


As of November 14, the control of Congress was too close to call. There was not an official winner in several races, and some projected losers are contesting the results. The U.S. Senate will remain under Democratic control, even though the Georgia race will be determined by a runoff election on December 6. Control of the House remains undecided, though trending towards the Republican party.


Regardless of this outcome, with Biden remaining president, we expect Capitol Hill will remain gridlocked. Given that this was a mid-term election, most of the key elections occurred at the state level with many of the national issues being fought locally. For insurers, this will result in multi-state efforts to understand and respond to regulatory challenges.


Uncertainty around election outcomes and control extended to the state level. Arizona, shown in white in Figure 1, did not have a clear winner in its governor’s race. Eighteen states, shown in blue, remained in Democratic control while Republicans, shown in red, retained control of 23 states. Eight states, shown in grey, remained divided, with one party controlling the governorship and the other party controlling both houses of the state legislature.



The Post Mid-Term Market Overview

If Republicans do gain control of the U.S House of Representatives, investors will likely celebrate the end of one-party rule as many of the most anti-growth measures being contemplated in Congress will fall by the wayside. But regardless, we believe 2023 could be a difficult year for markets, especially in the first half.

There are four major policy drivers of growth—monetary, fiscal, trade, and regulatory.

  • Monetary policy - The Federal Reserve’s (the Fed) Federal Open Market Committee (FOMC) is not likely to change course based on the election outcome. We expect the Fed to drive the economy into recession, one hopefully mild and short, to bring inflation down into its target range.
  • Fiscal policy - As spending bills must start in the House per the U.S. Constitution, House party control is important. If Republicans gain control, as seems likely, it is unlikely that any new spending and, consequently, more inflation-spurring demand-side stimulus, will be forthcoming. New taxes are less likely as well. The lame-duck session will probably deal with funding the government (hopefully avoiding a shutdown threat) and the National Defense Authorization Act, as both will have some bipartisan support. If Democrats keep control, we would expect higher spending, such as a re-invigorated Build Back Better bill, and higher taxes.


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