President Joe Biden has largely exhausted his political capital, according to analysts at BCA Research. The firm says any significant negative developments from now on “could derail his presidency.”
Despite some successes, such as negotiating bipartisan budget deals and achieving a soft landing for the Fed, the BCA says the Biden administration is struggling with weak public support.
“We are slightly supportive of the Biden administration’s re-election (55% chance) but expect its rating to decline,” BCA Research said.
Analysts stressed that ongoing issues including inflation, the foreign policy crisis and the prosecution of former President Trump are weighing on Biden’s ratings and election prospects.
As the U.S. election cycle intensifies into the summer and fall, election risk and political uncertainty are expected to drive volatility and risk premiums in U.S. equities and corporate bonds.
BCA Research suggests investors should favor defensive sectors, low-beta assets and long-term bonds until election uncertainty is resolved over the next five months.
Biden’s recent efforts to rebuild 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 unstable as elections approach.