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According to BCA Research analysts, President Joe Biden has largely exhausted his political capital. The company states that any major negative developments from this point “could destroy his presidency.”
Despite having some successes, such as negotiating bipartisan budget deals and the Fed making a soft landing, the BCA says the Biden administration is suffering from weak public support.
“We slightly favor a Biden administration for re-election (55% odds), but put it on watch for a downgrade,” BCA Research noted.
Analysts stressed that ongoing issues, including inflation, foreign policy crises and the impeachment trial of former President Trump, are negatively impacting Biden’s approval ratings and election prospects.
As the US election cycle intensifies over the summer and fall, election risks and political uncertainty are expected to lead to volatility and increased risk in US stocks and corporate bonds.
BCA research suggests that investors should favor defensive sectors, low-beta assets, and long-term bonds until election uncertainty is resolved over the next five months.
Biden’s latest efforts to restore his political capital appear to have failed, leaving his administration vulnerable to further setbacks. The bottom line, according to BCA research, is that the political and economic landscape will remain uncertain and volatile as the election approaches.
