Politics

Trump's 'roll' on North Korea and US economic growth should boost GOP's midterm chances: Analyst

Key Points
  • "Classic art of the deal," the president scares everybody on North Korea, but now he's in a "position to deal," political forecaster Chuck Gabriel says.
  • However, the Capital Alpha president acknowledges the risk of North Korea's Kim saying all the right things without living up to his promises.
  • Gabriel sees "60 percent odds on a Democratic House takeover, but similar odds for a retained GOP Senate" majority.
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What investors should expect from North Korea's pledge to denuclearize

President Donald Trump is "on a roll" that could help Republican candidates in the November midterm election, veteran political forecaster Chuck Gabriel told CNBC on Monday.

The recent overtures from North Korean leader Kim Jong Un concerning his nuclear ambitions are the "most unlikely set of events," said Gabriel, president of Capital Alpha Partners, which provides analysis of political outcomes for Wall Street.

"Classic art of the deal, the president with all his bluster scared the heck out of everybody throughout late winter and early spring. And now he's in a position to deal," Gabriel said in a "Squawk Box" interview.

"In the near term, this is certainly better than the leaders comparing the size of their buttons. The market will love that," said Gabriel. In January, Kim boasted that he has a nuclear button on his desk and Trump responded that his button "bigger" and "more powerful" than Kim's.

The possible thawing of six decades of North and South Korean animosity "should boost President Trump, which could help a great deal, along with the 3 percent growth, in the midterm elections coming up," Gabriel said.

Following last week's historic summit of Kim and South Korean President Moon Jae-in, Trump is preparing to meet with Kim in the coming weeks.

However, on the flip side, the Capital Alpha president acknowledged the risk of Kim saying all the right things to try to get the U.S. to lift sanctions without living up to his promises.

"A lot of people think that President Trump, who really values his skills as a dealmaker, could give away the store for a Noble Prize," Gabriel said.

In its inaugural Election Risk Report, Capital Alpha sees a "60 percent odds on a Democratic House takeover, but similar odds for a retained GOP Senate" majority.

"The notion of a 'blue wave' shifting control of both chambers could spawn more serious fears" in financial markets, the report said. "These could involve the blunting or reversal of the Trump administration's deregulation agenda and proposals to roll back December's corporate tax cuts."

Republicans credit tax reform and deregulation for boosting the stock market last year and in most of January 2018. Democrats believe the market's advance and a bump in the economy were teed up by former President Barack Obama's policies aimed at recovering from the 2008 financial crisis.