Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland discuss the Georgia Senate Runoffs with Brian Gardner, Stifel Chief Washington Policy Strategist.

Video Transcript

JULIE HYMAN: Well, while there are a lot of questions about what's going on with coronavirus, there are also a lot of questions about what may happen in Georgia tomorrow. That's when we get that special election to determine who will be seated as the next two senators from that state. And ahead of that, over the weekend, there was a leaked audio of a phone call that President Donald Trump made to the Secretary of State of Georgia effectively pressuring him to change the votes there as the president continues what looks to be his futile efforts to get the election switched around.

To talk about all of this, we are joined by Brian Gardner. He is Stifel Chief Washington Policy Strategist. Brian, thank you for being here. Now, it looks like the markets are largely shrugging off this phone call over the weekend. I want to get to the special election in a moment. But I do wonder, as we start to see this sort of schism developing in the GOP between those who seemingly are supporting the president's efforts and those who are not, are there any implications for lawmaking in the next Congress in terms of whether this is going to create divides beyond just divides by the aisle?

BRIAN GARDNER: Well, look, I think there is-- we've been living through this period of populism now for several years. And it is intensified during the Trump administration. He is kind of the ultimate populist. There are populists in both parties. So it's kind of a break between the populists and the establishment in both parties. So that does have implications for lawmaking going forward beyond the end of the Trump administration.

Being seen as part of Washington is still a problem. Ironically, the country just elected really what is one of the most establishment type figures of the modern era in Joe Biden. But he's going to confront this tone of populism going forward within his party, within the Republican Party. So it's going to be a challenge for him to get things through Congress and govern.

- And I guess, Brian, along those lines, I'm curious just about, like, the overall arc of policymaking in the US right now. There hasn't been a whole lot of it happening in the last couple of years. Since the tax cut, not a ton got done in the Trump era. Obama's second term was kind of bereft of any material policy changes. What do you see as the next catalyst for something big getting through? And what kind of areas do you think are workable at this point, given the state of things in Washington?

BRIAN GARDNER: When you look at it-- again, referring to what you just said-- the Obama administration, it was really the first two years, and then control of the House flipped, and the last six years were relatively unproductive legislatively. On the Trump administration, same thing. You had the tax, cut and that was kind of it. The second two-- the last two years were consumed with impeachment and divided government.

So we're in a period where legislatively probably not a lot is going to get done. There's always the potential for some bipartisanship. And, you know, there's a lot of speculation in Washington that Biden and Senate Majority Leader-- current Senate Majority Leader Mitch McConnell-- know each other for a long time, and maybe there are some deals to be done between the Biden administration and McConnell bringing on the Republicans. I'm kind of skeptical on that. And so it kind of punts the ball back to the regulatory world, which is interesting.

I think this is an underappreciated legacy of the Trump administration in reshaping the judiciary. Trump-appointed judges are generally skeptical of the reaches of the administrative state. And so as the Biden administration tries to pass new regulatory regimes, they're going to have to be very careful to stick to the plain text of the statutes they're enforcing and not go too far afield because they're going to get pushback from the judiciary.

BRIAN SOZZI: Brian, if the Democrats do wrestle back control tomorrow, what does that raise the probability for? Does it raise the probability for an infrastructure plan this year, the Holy Grail we've looking for, what, for 25 years? Does it raise the prospect of a greater stimulus package?

BRIAN GARDNER: Brian, I don't think there's a lot getting done. There's all this talk that-- I think it's more hope than anything else-- that McConnell and Biden can collaborate and get things done. But McConnell is only going to go as far as his party allows him. And you have Republicans who are going to be up for reelection in 2022. There are Republicans who are looking to run for president in 2024. They are not inclined to collaborate with the Biden administration.

So a broad infrastructure plan, probably not. I do think there's potential to reauthorize the five-year surface transportation bill. It's up for renewal. It's going to-- probably going to be renewed. But the fact that there are no new revenues coming in because there's no tax cut and tax hike coming, that constrains how big of a deal the infrastructure plan is. There will be one. It's just going to be modest.

On stimulus or COVID relief, we saw how difficult it was to get that through in 2020. I'm not sure McConnell is going to all of a sudden shift gears and give the Biden administration a big win. I think, depending on how the economy performs in the early part of the year, another round of COVID relief is off the table probably for six months.

And I was listening to the beginning of the show or the end of the last segment. You guys were talking about the manufacturing numbers that just came in. Those are not numbers that jump out at lawmakers and say, hey, we just passed $900 billion of relief. We have to do it again. So I think there's no more relief coming for at least six months unless suddenly the economy shifts gears and significantly underperforms expectations.

JULIE HYMAN: So Brian, what you're saying-- you know, the conventional wisdom is emerging that if, indeed, the two Democrats sweep in Georgia that stocks will go down. It sounds like you think that that would be the wrong reaction because, in fact, it doesn't fundamentally really change anything in Congress.

BRIAN GARDNER: Yeah. So I think there are going to be kind of two early reactions. One is a potential sell-off on the fears that there's more aggressive legislation coming through, including a tax hike. I think that's wrong. And I think, then, the market could actually rally on this hope that there's more COVID relief coming, more stimulus coming, more fiscal support coming. I also think that's wrong.

I actually think the market and politics could be in a relatively good place by not getting a lot of things done. I think divided government could be good for the markets and kind of settle in-- the incoming administration is going to focus on one thing-- vaccines, getting the vaccines out. So the first six months of the year, the only thing that matters is getting the vaccine out and getting it out effectively and widely.

And beyond that, policy wise, I think we're in for a period of relative calm, quiet, definitely a different tone from what we saw in the last four years. That's not bad for the markets. I mean, monetary policy is going to remain the same. It's accommodative. It's supportive. So you have a pro-market monetary policy. You have a stable tax policy. You have slightly more regulation but nothing off the charts. I think that's actually a good setup for markets. It's predictability. It's benign conditions. I think markets will eventually like that.

JULIE HYMAN: And hopefully it's better for all of our mental health going into 2021, as well. Brian Gardner, thank you so much of Stifel, the Washington policy analyst there. Appreciate your time, sir, and happy New Year.

BRIAN GARDNER: Thanks, guys. Happy New Year.