Market Forces Impacting Our World: Political Trends for 2016

This is Part 5, the final segment in our series about market forces destined to affect US businesses. And we saved the best for last; politics. Our lens for this post is to capture the sentiment of the nation, and its potential influence on policy. But where to start? The headlines and social media have been consumed with political hostility in response to recent Paris and San Bernardino terrorist attacks, and remarks by Donald Trump about Islamists. Yet, there are more fundamental shifts bubbling to the surface within American politics:

Lost in Ideology

Over the last ten years, the parties have split further on ideological lines. Those who consistently maintain strictly Republican or Democratic viewpoints have doubled from 10% to 21%.  92% of Republicans are to the right of the median Democrat (on issues of the day), while 94% of Democrats are to the left of the median Republican. Within the Presidential race, interest in outsiders is tied to distrust in government. Only 19% of Americans say they trust the government most of the time (the lowest rating in 50 years). They believe that keeping the country free from terrorism and responding to natural disasters are the top priority of the Federal Government. The implication is that the Federal government will remain in neutral, as there are few issues where consensus can be achieved. In a rare exception, early 2016 will bring legislation to repair the nation’s degrading highways.

The Presidential election will dominate the headlines

In the U.S. over the next 12 months. The election has the prospect of being as pretty as a Ronda Rousey fight. Never in the course of history have Americans faced such a stark contrast. The two parties can’t even agree on which are the most important issues.  President Obama has focused his energy on gun control, the Affordable Care Act, climate change, and negotiating a nuclear treaty with Iran.  Republicans emphasize immigration reform, reduction in legislation (such as Dodd-Frank), and religious freedoms. Hillary Clinton will have to defend the policies of the administration, and a record she helped to construct. The Presidential election is likely to be decided in swing states such as Virginia, Ohio, Florida, Indiana and Colorado. The next President of the United States may influence U.S. policy more than any in generations. While the Executive and Legislative branches remain fractured, the U.S. Supreme court includes four Justices who are 76 or older. The next decade could represent a judicial sea change on a myriad of issues from health care to abortion. Republicans hold a 5-seat advantage in the U.S. senate, which will be hotly contested in 2016.  As influence has shifted from the Tea Party to the Freedom Caucus, Republicans will try to find an identity that can resonate with a broader base.

Terrorism Front and Center

The San Bernardino and Paris attacks, bombing of a Russian plane and Putin’s posturing in the Middle East loom large. The President has made it clear that he does not have the appetite for a protracted war on ISIS, supported by ground troops. The most likely scenario in the next 12 months is a continuation and escalation of regional conflicts. Putin’s aggression masks the weak Soviet economy and speaks to his hunger to influence the Middle East. China is also raising its sword with territorial land disputes with Japan, Taiwan and others.  If China really wants to test the resolve of the U.S., the sabre rattling will continue with Japan, which is protected by a treaty with the U.S.

Election Timing

The first two months of the year will be telling on the Presidential election, leading up to primaries in Iowa and New Hampshire, and Super Tuesday on March 1st. The timing of the Paris attacks and recent gun violence in San Bernardino and elsewhere will certainly shape the election, and non-traditional candidates such as Trump, Carson and Fiorina could suffer. Bernie Sanders will have to have a strong showing early or will fizzle away.  All candidates will have to have the staffers required to run campaigns in multiple states where they are hardly present, which is why traditional candidates are expected to gain deeper into the election. Expect Cruz and Rubio to take support from Trump and Carson in early 2016. A protracted debate about terrorism may favor Clinton who will tout her State Department credentials.

The Next Hot Spot could be South/Central America

The U.S. is still exercising much of its military muscle fighting a silent war with drug cartels. Columbia, Peru and Bolivia are the world’s 3 largest producers of coca. Guatemala is a key transport country for cocaine and heroin. Refugees from the region continue to migrate through Mexico to the U.S. But perhaps the most volatile hot bed can be found in Venezuela. The country once ruled by Hugo Chavez (who died in 2013) aligned with Cuba and other antagonists of the U.S. The oil-rich nation has a depressed economy, and a crime rate that is the 2nd worst in the world.  120 police officers have been slain this year, in Caracas alone. With President Nicolas Maduro losing the election, the nation is ripe for a change in power, corruption and revolt. Additionally, the severe El-Nino weather pattern could wreak havoc on poorer Central American nations that may require U.S. aide.

Polarization and Gun Rights

While the NRA is polarizing to many, American’s views on gun rights are more consistent than most issues. 79% of Republicans and 88% of Democrats favor background checks for gun shows and private sales.  79% and 81% want to prevent sales to the mentally ill. Where opinions differ is on the use of a federal database of gun ownership.

US Immigration

Of course Donald Trump has set off a fire storm on an issue that runs deep for Americans. 73% of Republicans favor building a fence along the border with Mexico, an initiative supported by only 29% of Democrats.  Yet even 53% of Republicans oppose changing the birth right status of the children of immigrants. Party lines also inform on our opinions of the refugee crisis. 37% of Democrats support a decision to let in more refugees, while only 30% of Republicans support it. Immigrants still comprise a significant source of employment for U.S. companies (compliance with I-9 rules are lax to say the least).

Digital Media is the new Campaign Stop

The methods employed by candidates are changing rapidly in the digital age.  Search algorithms offer campaign strategists real time unfiltered feedback about candidates and search terms allowing them to pivot quickly. Like in Obama’s initial run, technology will take center stage in influencing the election.

Hot Topic- Privacy

Congress will be reviewing a series of potential laws and regulations designed to protect the data and privacy of Americans threatened by the prospect of big data, spoofing and a number of advances that provide real time access to consumer buying habits.

Sources: What’s at Stake by Joshua Green Bloomberg BusinessWeek Mixed Views of Initial US Response to Europe’s Migrant Crisis Pew Center The Kiplinger Letter Venezuela oil slide threatens Maduro’s grip on Power by Ernesto Tovar AFP Voters Almanac 2016 Edition-Bloomberg BusinessWeek Majority Says and Budget Deal Must Include Planned Parenthood Pew Research 16 Maps of Drug Flow into the US –Business Insider Google Will Tell Us What We’re Thinking Bloomberg BusinessWeek Beyond Distrust: How American’s View their Government Pew Research The Central Intelligence Agency (US) Political Polarization in the American Public-Pew Research