In Washington, the election outcome is a foregone conclusion – a solid GOP victory in the House, well in excess of the 39-seat magic number, with the Democrats narrowly retaining the Senate. Not only is this outcome conventional wisdom inside the Beltway, but it appears to be fully priced into the markets as well.
Thus the real focus in this city is on the post-election environment. It strikes us that there are three distinct stories: one for the Democrats, another for the Republicans, and still another for investors.
Democrats: The finger-pointing and recriminations will begin within hours of the election. The spotlight will shine on President Obama – will he pivot to the center as Bill Clinton did in 1994 after the Newt Gingrich landslide? We’ve talked with key players in both parties, and there seems to be a consensus that Obama will have great difficulty moving to the center – largely because he, unlike Clinton, isn’t remotely a centrist.