Pimco's Libby Cantrill Talks Midterm Blue Wave

Libby Cantrill · PIMCO

The midterm wave is a national referendum against the executive branch, closer to 1974 than 2006.

Cantrill argues the Democratic midterm wave is larger than the 2006 scenario PIMCO had been describing to clients. Her evidence is that Democrats are winning in districts they did not expect to be competitive, including a Nevada district that had never elected a Democrat in its roughly 45-year history. She reads this as a broad rebuke of the Trump administration rather than a routine midterm swing, which is why she compares it to 1974.

“This could look like a wave that you saw in 2,006 where Democrats took back both the House and the Senate. This is 1974. ... This is a total referendum against the executive branch.”at 4:49

Libby Cantrill · PIMCO

Democrats will need to compromise with Trump on some issues because they must show they can govern.

Trump still holds the White House, and Democrats will not reach a veto-proof majority, so they cannot override him. With about 55 Senate seats, Democrats also cannot pass most legislation alone because the filibuster stays in place. Voters will expect them to govern rather than only conduct oversight and impeachment, so Cantrill sees a window for a deal and says she would be very surprised if Democrats did not compromise with the president on at least some issues.

“Filibuster's not going anywhere. That means Democrats need to actually compromise with Republicans on some things... I would be very surprised if Democrats don't pivot to compromising with the president at least on some things.”at 8:53

Libby Cantrill · PIMCO

Permitting reform could gain traction in the lame-duck session, cutting red tape for both traditional energy and renewables.

Cantrill says a huge permitting reform bill could gain traction in the lame-duck session before the new Congress takes office. It has support from traditional energy advocates because it would make it easier to build conventional energy assets. It also reduces red tape for renewables, so it has appeal across the energy sector. She notes that it still needs a bipartisan Senate vote, which she thinks Democrats will support as they try to clear the decks.

“I think you could see something like permitting reform actually gets some traction... it allows for more sort of, you know, traditional energy assets to be built, reduces red tape, then also reduces red tape for renewables”at 4:09

Libby Cantrill · PIMCO

The incoming Democratic caucus will be more moderate, with more blue dogs, which is positive for markets.

Cantrill says the new Democratic group will be more moderate than any seen in a long time, with more blue dog Democrats, and she calls this the key market point. Her implication is that a moderate, deficit-conscious caucus is a more fiscally disciplined counterweight to the executive. She is not giving a number, only a directional view on fiscal discipline.

“The one thing I think that's really important to point out here for the markets is this is going to be a more moderate group of Democrats than we have seen for a long time. There are gonna be more blue dogs.”at 6:18

Libby Cantrill · PIMCO

Opposition to Canada tariffs could build a veto-proof majority in Congress.

Tom Keene raised tariffs on Canada as one of the few issues that could override a presidential veto. Cantrill agrees, pointing to the voter rebuke on tariffs in the Upper Midwest. She argues that this political backlash could bring enough Republicans to join Democrats to reach the two-thirds threshold needed to override a veto.

“look what happened, right, in the Upper Midwest, like massive rebuke on the tariff, you know, agenda or what have you. I could see that actually getting that to that veto proof majority.”at 8:22

Libby Cantrill · PIMCO

Russia sanctions could reach a veto-proof majority because they upset lawmakers in both parties.

Cantrill says Russia sanctions have upset Republicans on the Hill as well as Democrats. That shared frustration is why she thinks a sanctions bill could clear the two-thirds threshold needed to override a presidential veto.

“Also, Russia sanctions. That is something that really upset Republicans on the hill, also Democrats. I could see that actually getting to a veto proof majority.”at 8:33