Congress returns next week for as many as four work weeks before the scheduled summer/Labor Day recess. Whatever information contained in the previous sentence is the sum of certainty shaping the coming month in lawmaking DC. The reasons are well known given the six-quarters recurrence of this situation, which at times is apolitical, but only in occasional retreats from frequent intraparty factionalism and interparty partisanship. While a plausible agenda might be imaged, timing and final action on any single item eludes regular observers just as it does House and Senate leaders.
- Tight voting margins, presidential preferences, and wars in Ukraine and Iran highlight factors elevating electoral risk aversion influencing leaders’ willingness or ability to schedule floor votes. Nothing known today eases Speaker Johnson or Senate Majority Leader Thune’s summer floor management challenge.
- President Trump’s command of every news cycle exacerbates the abovementioned condition. Surprises are common but not easily fitted into legislative negotiations or leadership relations. At times, members of Congress struggle to build messaging and vote counts on key legislation – both politically favorable initiatives (housing) and transformational law (OBBBA healthcare spending cuts).
National security leads the list of priority items in the coming work period. However, nothing must be accomplished before the August break. It is too early to guess what might happen or to project Congress if would go home without successfully completing any of the following.
National security
Money. For investors interested in defense and tech names, avoiding a continuing resolution of any meaningful duration is paramount. Bipartisan 2025 defense acquisition reforms produced significant latitude for Administration defense technology programs. A long-run CR would constrict second-year funding. Congress places immense pressure on the September work period if it cannot agree on FY27 appropriations or another reconciliation bill carrying Trump’s preferred $350b allocation.
Authorization. If reconciliation continues to lose viability (my yearlong call), the appropriators’ jobs gain importance. Both the FY27 process and FY26 supplemental monies benefit from structured, bipartisan negotiation. None of the forward-looking money plans matter unless Congress enacts and the Executive signs an authorization bill. This legislation slowed to a halt last month as intraparty tensions rendered floor votes untenable.
Intelligence. Pulte’s insertion as the acting director of national intelligence created much but not all that tension, especially in the Senate given its constitutional confirmation role. Electoral politics stunted Senate floor functionality given bipartisan concerns about elections integrity schemes Pulte might pursue.
Cryptocurrency. Political campaign spending and related top-down pressures always were the CLARITY Act’s legislative momentum sources. These factors produced relatively expeditious House of Representatives action last year but haven’t yet produced the 60 Senate votes required. In the past month, reports of crypto exchange activities and the First Family’s financial windfall complicate negotiations on issues like financial stability protections and ethics conflicts. Before taking the Senate out late last month, Thune emphasized legislation needing and securing 60 votes stand better odds of July-early August consideration.
Nominations. The plural is a bit misleading. The Senate’s nomination bandwidth will likely be devoted to Deputy AG Blanche’s potential confirmation to the Justice Department’s top job. His confirmation outlook carries much of the weight mentioned in this note. The DNI/Pulte situation, war policy and voter reaction, and the President’s relations with Senate Republicans all seem likely to influence Blanche’s nomination in committee and possibly on the floor.
Midterms. Many narratives initially embraced as important indicators have proven either quick fades or of diminished value relative to original expectations. Platner’s drama in the Pine Tree State, 2025/26 redistricting, Trump’s active primaries involvement and the pending original midterm convention in Dallas, mentioned policy issues, and data center frictions in a few districts all seem likely to part of the 2026 midterms political autopsy. Assigning weights in specific races or overall balance of power outcomes amounts to seriously inexact guesswork which I will engage in October after more reliable cues can be discerned.
- History favors opposition parties in midterm elections as only once this century has a president’s party not lost seats in either body of Congress (2002). In 2018 (Trump+2) and 2022 (Biden+1) the majority gained in the Senate. The other three midterms in the past two decades produced presidential losses in both houses.
- Midterm voters rarely confront heavy emphasis on international affairs. In 2002, the president’s public standing burnished by geopolitics helped deliver significant gains in Congress (W Bush, 2002). Tariffs kept headline volatility alive much of the 1Q25-1Q26 period, stoking affordability and US global relations concerns. New York Fed Bank President Williams yesterday observed tariff related inflation is at or near its peak. That favorable forecast will balance against lags, if any, in voters’ price spike perceptions especially as the t-word has not yet departed the present geopolitical lexicon. The attached analysis quantifies President Trump’s potential 2026 impact on partisan 10-year winning streaks of each dominant national political party (HERE).
Outlook
DC policy risks have not yet developed into institutional investor near-term risk in my view. Dangers to my 3Q26 horizon would seem to come foremost from economic and market viewpoint changes than US policymakers focused on post-midterms balance of power. 22V macroeconomic, quant, and technical analysts see a resilient economy supported by a strong financial services sector managing through bond yield and AI capex uncertainties. Having grown accustomed to regular gyrations in the status of US-Iran engagement, geopolitics retains shock value which any day could flare into sustained negative surprise though traditional electoral politics should cap even this uncertainty downside. An admittedly under-informed intermediate timeframe stretches from October through 1H27 as investors, sovereigns, and other stakeholders adjust to US midterm election implications, ever-present geopolitical tensions, and G20 economic conditions.
