Yahoo Finance’s Seana Smith and Adam Shapiro speak with Ed Mills, Washington Policy Analyst at Raymond James, about the election and how a Biden win coupled with a Democratic sweep of the Senate could increase the risk of inflation.
ANTHONY SCARAMUCCI: I think Trump loses Florida, and I think this is over by 11:00 PM Eastern time. I also think he was a very subdued Mr. Trump this morning-- President Trump. And so that's an indication that Republican leadership has told him, knock it off. And so I predict that he will not call himself a victor.
ADAM SHAPIRO: That was Anthony Scaramucci. You may recall that he served in the Trump administration for 11 days as White House communications director. He was on Yahoo Finance earlier this morning. To help us understand what Mr. Scaramucci is predicting and where we may be heading later tonight, let's invite into the stream Ed Mills. He is Raymond James Washington policy analyst.
Good to have you here. And you know, Scaramucci, he's been saying a lot of things about Trump losing or leaving and all of that. Is there any insight you have from your position that can tell us what the outcome of all this is going to be?
ED MILLS: Yeah, I mean, from our perspective, the most likely outcome is a Democratic sweep. I do get a little bit cautious, in terms of looking at some of the predictions saying with a kind of specificity, down to kind of the tenth of a percentage point in terms of kind of predictions. Do I think that Donald Trump can win? He has a shot, absolutely. Can Republicans maintain a control of the Senate? Yeah. I just give those much lower odds.
SEANA SMITH: Ed, what do you thought-- what are your thoughts just about the odds of a contested election at this point? Because when you take a look at the stock market's performance today and look at what we saw yesterday, it doesn't look like they're worried about a contested election. Are you confident that we're going to have a clear winner tonight?
ED MILLS: Seana, I think that is the question that I get the most from investors here at Raymond James. I think everyone hopes it gets resolved in less than a Scaramucci, as you mentioned-- in lesson 11 days. If you do have a decisive victor in Florida, North Carolina, Ohio, a couple of the other states, we could have a general sense as to where this is going.
If that decisive victor tonight is Joe Biden, I think that that is on the cusp of a clear Democratic sweep. If Donald Trump is the clear victor in those states, there are parts for Vice President Biden, but they get much narrower, and we'd be watching to see what level of polling error there is. But there is no doubt from investors, the real risk from this election, at least in the near term, is anything that is contested, that has to go to courts, any recount, civil unrest.
ADAM SHAPIRO: Ed, has your team taken into consideration, no matter who wins the election, the future of Jay Powell? I mean, would he be renominated, perhaps, under a President Biden, or would he might be fired by a President Trump?
ED MILLS: Adam, you know, so I'd say we started off this year with a guarantee that Jay Powell was going to be a one-term Fed Chair. I do think that he has performed magnificently throughout this crisis and has put himself in position. I do think that Republicans have some concerns about his hiking of interest rates before the pandemic, and I think Democrats have concerns about his deregulation agenda that was adopted during the Trump administration. And therefore, I think there will be a look to see if he gets replaced. But the market generally doesn't like to change at the Fed, so that might be his saving grace, in addition to how well he has performed in his response to COVID-19.
SEANA SMITH: Yeah, we also want play a second sound bite here from Anthony Scaramucci, who's talking about-- just in terms of how the COVID pandemic, the impact that that has had on the economy and also what we could see if we do see a change in leadership. Let's listen to what he said.
ANTHONY SCARAMUCCI: I remain missile-locked on the notion that Trump is going. He deserves to go. He wrecked the economy. We've got an extra 100,000+ people dead as a result of his leadership during the pandemic, and he's made our country weaker as it relates to our alliances. And that's the reason why European markets are rallying, UK markets are rallying. Because they know we could have a restoration of the Western alliance, which would be good for the world and would be good for peace and prosperity.
SEANA SMITH: Ed, I'm just curious just to get your thoughts on that, just in terms of if we do see a change in the administration, the economic impact of that, and also more specifically, what it would mean for trade.
ED MILLS: Yeah, Seana, what we look at from Joe Biden is that he's spent his entire career in the Senate, on the Senate Foreign Relations Committee. He was given the choice by Barack Obama, vice president or Secretary of State. If he does win, I do think there is a return to diplomacy, a re-embracing of our traditional allies since World War II. The China trade fight could get a little bit of a reset. It doesn't completely go away. But what we won't have is we're not going to be one tweet away from a major policy shift in our foreign policy or in our trade policies or getting additional tariffs. That is something the market will absolutely like.
ADAM SHAPIRO: Ed, if Trump wins, day one, what is the task? If Biden wins, day one, what is the task?
ED MILLS: I think the task is somewhat the same for both, which is to get COVID under control and to continue the recovery of this economy. I think, in Trump victory, that's where we get the quickest fiscal relief. In a Biden victory with a Democratic sweep, that's where we get the most fiscal support. I think that's exactly what the market will pivot to as soon as we have a clear winner. If there is a Democratic sweep, I wouldn't be surprised if we see the long end of Treasury yields go up on an inflation concern, and we'll have an inflation-reflation trade that takes off after this election.
SEANA SMITH: Ed, how much faith are you putting into the polls that we're seeing? Because I was going through your notes, and you were talking about just at the accuracy of the polling and also just whether or not we could see this hidden Trump voter. What's your thoughts on this now that we're just a few hours away from the first polls closing?
ED MILLS: Yeah, one thing that's been really difficult this election season is the wide variety of polls and the quality of the polls and having more polls this time with a clear partisan agenda, either for Democrats or for Republicans. So from that perspective, there will be error within the polls. Some of these polling errors are going to over-count or under-count someone's strength.
Overall, however, we have seen higher-quality polls in the state level. That's what was the problem in 2016. And for Biden to lose, which is possible, the polling error would have to be greater than it was in 2016. I think that's what the market is betting that's not going to happen and there will be a clear winner tonight. We'll have to tune in in the next couple hours to see if that's correct.
ADAM SHAPIRO: OK, let's say we get a Biden victory but Mitch McConnell and the Republicans stay in control of the Senate. What does that bode for investors going forward?
ED MILLS: Yeah, Adam, I think there could be a relief rally out of a thought that we're not going to get the major tax changes. You won't have the elimination of the filibuster, some of the other agenda items that are on the Biden platform. However, that might be the worst outcome for the economy because in that scenario, we'd probably get the least amount of stimulus. If you notice, Mitch McConnell has not been involved in any of these stimulus negotiations because he does not want to back the Senate into a specific dollar amount. So we're looking at something probably sub-$1 trillion in a Biden victory with a Republican Senate with debt and deficit concerns being the mantra out of Senate Republicans.
ADAM SHAPIRO: You know, there were a lot of complaints, if you go back to 2009, that the stimulus then was too little for some of those issues. Got to say thank you very much right now-- Ed Mills joining us, Raymond James--
ED MILLS: Thank you.
ADAM SHAPIRO: --Washington policy analyst. But we're not done talking about the election. Coming up, we're going to head to our Washington DC correspondent for the latest as Election Day in America rolls on, plus what a Biden or Trump win would mean for big tech. Dan Howley has that for us right after the break.