Prof G Markets
00:00:00 · S0, S1, S2, Ed Elson
[00:00:00] S0: Support for the show comes from Morgan Stanley's podcast, Hard Lessons. Some investing lessons only become clear after you see how a call plays out. On Hard Lessons, iconic investors sit down with Morgan Stanley leaders to go behind the scenes on the critical moments, both successes and setbacks that shaped who they are today. Watch or listen to hard lessons wherever you get your podcasts. [00:00:23] S1: This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now? Then this is a job for Indeed sponsored jobs. [00:00:54] S2: I'm Ina Garten, and each week on Happy Hour, I invite new and old friends for a drink and a fun conversation at my kitchen table in New York City. On this week's episode, I'm joined by Jennifer Garner. We talk all about what it means to be a good friend, Jen's encyclopedic knowledge of my recipes, and the Paris tour I put together for Jen and her daughter. New episodes of Happy Hour are available every Wednesday. You can watch on YouTube or listen wherever you get your podcasts. Cheers. [00:01:36] S3: Money markets met. [00:01:37] S0: If money is evil, then that building is hell.
00:01:40 · Ed Elson
[00:01:40] S3: Show goes on. The pressure never watches. Show sell. Welcome to Prof G Markets. I'm Ed Elson. It is November 5. Let's check-in on yesterday's market vitals. The major indices ripped higher following the election results. The yields on ten year treasuries declined. Brent crude dropped 8% to $95 per barrel. And neo cloud stocks tanked while big tech stocks rose in anticipation of new AI policies from the Democrats. More on that later. Okay. What's happening? In a seismic shift for American politics, Democrats have won control of Congress. Democrats flip the house where they're on track for more than 250 seats, and the senate where they've won at least 54. It was a night of historic upsets in red states. Iowa elected its first Democrat governor since 2006. Kansas sent a Democrat to the senate for the first time since 1932. And in Texas, James Talarico became the first Democrat to win a senate race since 1988 on the same night that Gina Hinojosa unseated governor Greg Abbott. The results are widely considered a rebuke of president Trump and his economy. Gas prices are up 40% from a year ago. Inflation is running well past the Fed's target, and mortgage rates are back above 7%. Stocks rose after the election. The Dow jumped 3%, its best day since April 2025, and the S and P and the Nasdaq each rose nearly 2% as well. So what does a Democratic Congress mean for the economy and for markets over the next two years? Joining us to discuss this, we're speaking with Catherine Rampell, economics editor at The Bulwark and anchor at MS Now. Catherine, thank you for joining us. Just an unbelievable sweep on so many different levels. We could go anywhere with this, so we'll just start with your initial reactions.
00:03:40 · Catherine Rampell, Ed Elson
[00:03:40] S4: Yeah. I mean, was a generational route. And I think there was a high expectation for Democrats going into this election, but it just exceeded all expectations. As you point out, Kansas just got its first Democratic senator since 1932. Heck, there were Democrats who won races where they weren't even running. There was a guy in Iowa who was still on the ballot after having dropped out for a, I think it was a state legislature seat, and he won. That's crazy. The the the voters were clearly just infuriated by the economy that they're dealing with with the war, and they decided to deliver a message to Donald Trump. And this is the message that they gave. I think the real question is how much this is a Republican loss versus a Democratic victory. Arithmetically, obviously, they're the same thing, but what that means in terms of the mandate for Democrats going forward looks very different depending on how you interpret it. [00:04:44] S3: Trump has been saying that that this wasn't about him, essentially. He's saying that, you know, because he wasn't on the ballot, that's why there was such a historic loss. I assume you disagree with that. I mean, all of the polling seemed to suggest that this is specifically about Trump, specifically about him. He was on the ballot. I assume that is your view as well.
00:05:06 · Catherine Rampell
[00:05:06] S4: You can interpret this as nothing other than a wholehearted repudiation of the Trump agenda. Americans are mad that gas prices are high, that grocery prices are high, that mortgages are expensive. They're mad that Donald Trump promised that he was going to lower prices, which we can get into why that was never going to happen. But, of course, instead of even letting prices kind of plateau, instead of just kicking back and enjoying the relatively strong economy that he inherited, Trump decided to basically, push all of the buttons that made the economy worse. Generally, I... I'm of the view that presidents don't have a lot of levers to pull to affect the economy. They they get too much credit when the economy is good, too much blame when the economy is bad, blah blah blah. We have learned in the past year and a half that, actually, presidents can't do a whole lot to improve the economy, but they can do quite a bit to make it worse. And unlike other kinds of things that presidents might do where it's hard for voters to connect the dots between, like, an infrastructure project that takes twenty years or whatever to really pay off or some sort of subsidy. In this particular case, it was really easy for voters to look around them and say, I'm mad about x, y, and z gas prices, let's say, and connect the dots to a specific thing that Donald Trump did. So, yes, I definitely view this as a rebuke of the Trump agenda.
00:06:40 · Ed Elson
[00:06:40] S3: Yeah. There was almost no nuance. It seems like every election, there's always a blame game. There's always some confusion as to, like, what's actually going on. It feels like this is the only election we've ever had where it's like, oh, no. Everyone knows exactly what is happening here. Everyone understands what the problem was, which to your early... Earlier point to me says this was less of a Democratic victory than a Republican loss, which I guess the question then becomes, what are the Democrats supposed to do with that? Are they going to recognize that depending on if it's true? What do you think?
00:07:14 · Catherine Rampell
[00:07:14] S4: To be fair, I do think that Democrats were strategic in running pretty good candidates in a lot of these races. They were obviously helped by the fact that Americans hate the Trump agenda and hate the war and hate the tariffs, etcetera. But they did run good candidates in places like Kansas and in places like Texas. So, you know, they were maybe gonna get over the line no matter what in some places. But in those states that looked out of reach not that long ago, I do think that it was helpful that they had good candidates. So I don't wanna rob them of all their their laurels here. When it comes to what that means that they should do, I think that voters are pretty clear that they want lawmakers to focus on affordability. Now there's a bunch that Democrats can do to roll back some of the damaging Trump policies, things like restoring the funding for Medicaid that was cut, SNAP funding as well, or rolling back the tariffs. You know, there are a bunch of things where they can undo Trump policies. When it comes to actually doing new stuff on affordability, that's where it's a lot harder. I think Democrats have been overly simplistic in their messaging about all of this, you know, with some calling for things like a nationwide rent freeze or other kinds of price controls or things like that. Those are not gonna work. I don't know exactly how much political momentum there is behind those kinds of things. And besides, they certainly have more than their work cut out for them in just reversing some of the Trump policies. But I do think that there's gonna be a fight over the next couple of years and heading into the twenty twenty eight presidential election about what the actual affirmative message of the party should look like and what that policy agenda should look like beyond just, you know, scrubbing the evidence of Trump policy off of the government as it stands now.