The most-compelling thing I've heard about Joe Biden this week is this: If his debate performance as a one-off, he would be scrambling to do interview after interview, press conference after press conference. Instead, he's done some scripted rallies, reading from a teleprompter. Yes, he sounded a bit better but the unwillingness to put himself in a position where he has to improvise is damning.
He's obviously declining and the latest polls show a drop in support.
Now power is seductive and addictive and there is no one that can force him out, so maybe he stays. That's his decision alone. But PredictIt is now showing Kamala Harris as the betting favorite to be the nominee.
That's wild. We're may be about to live through one of the all-time moments in US politics.
The question is: Why Kamala?
The answer is obvious. When people donate to the campaign, they donate to the Biden/Harris campaign and right now the war chest is $240 million. If Harris takes over, she can keep that money. If someone else does, it gets repaid.
So the equation isn't Kamala or Newsom or Whitmer. It's Kamala +$240 million vs Anyone Else +$0.
If there was someone kicking down the door who was an obvious winner, I think they make the switch but the polling numbers show it's not that big of a difference.
What happens next
Assume Biden drops out, perhaps this weekend. Again, I certainly don't think that's a certainty but assume it does and he throws his support behind Kamala.
The next six weeks gets very interesting. The Democratic National Convention is Aug 19-22 and no nominee is officially decided until then. I strongly suspect the play will be to put Kamala Harris out there, let her spend that full $240 million and see how the polls look by early August.
I don't think she's the best pick and I think they could have to pivot again. Biden has 99% of the delegates at the DNC and once he drops out, they're free to support anyone. It will come down to the convention and -- in theory -- they can support anyone. That's why I think that as it becomes clear that Harris won't beat Trump, they pivot.
At that point anything is possible but I can see many scenarios where support catalyzes around an outsider. After all, most people don't want to go into the US Presidential race because it's a two-year grind. But what if it was only Aug-Nov? That would be awfully tempting to some very-interesting people like:
I'd bet Jamie Dimon would trounce Trump. The left-wing voters would have no choice but to support him and the Trump would bleed soft support to him.
It would also be refreshing to have an adult in the room. Now I'm not saying it has to be him but the point I'm making is that I don't think a pivot to Harris would make it a done deal. Now there are some challenges here because the Ohio deadline to get on the ballot is Aug 4 but if they have to abandon Ohio, they might just have to do that. It's not like they had a realistic chance there anyway.
What it means for markets
There are so many moving parts here but I think the best way to think about this is: Sweep or no sweep. So much time is spent on Presidential politics but the House controls the purse strings and that's the spot to watch.
I don't think it was a coincidence that the rise in Treasury yields started right after the debate.
That was the market pricing in a Republican sweep along with more tax cuts (and big deficits).
The simple way to think about it is: Sweep (for any party) = bigger deficits (with better growth but also higher inflation). Divided congress = gridlock (expiry of the Trump tax cuts, slower growth, lower inflation).
So if you're thinking about Kamala Harris, the question isn't so much 'can she win' as much as 'can she deliver the House' (where Democrats were favored until last week because his party was polling better than Biden). The same goes for another candidate.
On net, I think any change helps Democrats keep control of the House at this point but I could see the argument that Harris will flop as well. I think that's part of the reason that markets have been so undecided/unmoved about the political earthquake that could unfold this weekend.
