Episode summary
Affordability will be 'Winning Category' for Midterms, Says Monica Guerra
Bloomberg Surveillance
· · Guests: Monica Guerra, Steve Sosnick, Brendan Foley
Summary
Monica Guerra of Morgan Stanley Wealth Management argues that affordability will be the central political theme heading into the midterms, and that the Trump administration will keep pressing it through housing, energy costs and other consumer expenses. She says the administration is likely to use messaging around affordability more than immediate relief, because many proposals still require Congress and because policy uncertainty remains high.
Guerra also says tariffs are likely to stay in place in some form even if broad legal challenges succeed, with the administration prepared to use other trade-law tools such as Section 232 and Section 201 to create a patchwork framework. She suggests the White House may justify tariffs selectively on national-security grounds, but that a broad tariff rebate check is very unlikely if fiscal priorities shift toward defense.
On markets, she says midterm election years tend to underperform and the year after tends to do better, especially if Congress ends up split and gridlock stabilizes policy. She expects the larger fiscal impulse to come from defense spending, citing a requested $1.5 trillion defense budget and framing it as a major source of economic multiplier effects in 2026.
Key takeaways
- Guerra says affordability is becoming a "winning category" for the midterms, with housing and energy costs at the center of the campaign message.
- She expects the Trump administration to emphasize affordability mainly through messaging, because many ideas still need congressional approval.
- Guerra says tariffs are likely to persist through alternative legal channels even if the Supreme Court strikes down one framework.
- She thinks a broad tariff rebate check is "highly unlikely" because fiscal resources may be redirected toward defense and geopolitical priorities.
- She says midterm election years tend to lag, while the year after can outperform if policy becomes more stable under split-gridlock Congress.
Notable quotes
“for the midterms it's likely to be more messaging on energy costs versus an actual reduction”
“the tariff environment is here to stay even if we IBRA is struck down by the Supreme Court”
“we could end up in a gray zone where you get a nuanced carve out on tariffs”
“We're going to see more and more of this discussion because it is going to be a winning category on that campaign trail”
How the episode opens
What we're thinking right now is that it's likely to go actually to the defense industry. You had Trump request a $1.5 trillion defense budget. This is a 50% increase over the prior year, the largest year over year increase since the Korean War as a percent of GDP.
So while we're not saying this is wartime, it does indicate how involved we are on so many geopolitical fronts. And that's really where the economic multiplier is likely to come from, from the fiscal side in 2026. Monica, it's an election year yet again.
What does that typically mean for markets here? Because, you know, oftentimes in these, you know, midterm elections, you get a change in controls, various houses of Congress. How do you play that?
So midterm election year markets tend to underperform and it's the year after that you get the outperformance. And that's because folks are waiting to see. Right that that outcome.
Typically, what you'll get is if we end up with a split gridlock Congress in 2027, you're going to be off to the races, right? Because nothing changes and policy is stable. But right now we're in that policy uncertainty mode.
The one thing we do know we're going to get is that focus on affordability and the Trump administration keeping the midterms as part of every single conversation that they have. And one of those things is we're going to be seeing it in housing, trying to control energy costs, as well as making other aspects of spending and the consumer affordable. But if I get on my Rolodex, you're one of the best people to talk to about well intentioned politicians, quote, trying to control.
Is there any history that politicians can control? Paul Sweeney's Electric bill. I think it's I think it's challenging to do.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- midterm affordability
- utility rate case
- earnings season outlook
- policy uncertainty
- consumer demand
Companies and tickers mentioned
- MS
- ED
- DAL
- UAL
- PG
- MKC
- MMM
- FAST
- JBHT
- IBKR
- Morgan Stanley
- Consolidated Edison
- Delta Air Lines
- United Airlines Holdings
- Procter & Gamble
- McCormick & Company
- 3M
- Fastenal
- J.B. Hunt Transport Services
- Interactive Brokers
Watch the episode
Watch “Affordability will be 'Winning Category' for Midterms, Says Monica Guerra” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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