PIMCO's Libby Cantrill Talks Money, Markets, and Midterms

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Tom Keene (0:07)

Good morning, everyone. Libby Cantrill with us right now. I want to get to the midterm elections, and how many business days? It's like 13 business days till we get to the midterms. If you look at the weekends, that's just the focus on the Denver Broncos. Cantrill here, cause she can't concentrate tonight. Broncos here. We're gonna come back.

Libby Cantrill (0:26)

We had a really difficult season so far, but we're gonna come back.

Tom Keene (0:29)

This is like a real football game tonight. I mean, Broncos, Seattle was like...

Libby Cantrill (0:32)

We're just like fingers crossed that Bonix delivers on us.

Tom Keene (0:36)

That's like late season football tonight.

Libby Cantrill (0:38)

I really do appreciate that we're leading with this, Tom. Because this has actually been more of a center of focus in the midterms.

Tom Keene (0:43)

Well, it's a focus, but seriously, and this is after Libby's contribution yesterday with Nathan Hager to money markets in the midterms in Washington. What was the body language at that seminar yesterday in Washington?

Libby Cantrill (0:57)

Well, yeah, I would say just in general in Washington, I was on the hill afterward. And Republicans are pretty down and out on the House. I think that they've just almost capitulated that they are going to, likely the House will flip. Of course, Republicans only have a three seat majority, as you know.

So Democrats don't need to do much to take it back. But it did feel like this sort of resignation was setting in. I think the Senate, people still think that Republicans can pull it out on the Senate. I think regardless, though, it's going to be a very small majority.

Tom Keene (1:26)

In your holistic research at Pimco, do you have any measurement of turnout now? To me, that's the immense mystery.

Libby Cantrill (1:34)

Yeah, I think it's easy to read too much into early vote. I mean, you are seeing some states that have started the early vote. Of course, about half of the electorate will have voted before the actual election. And the turnout is high. But I would just say there have been a lot of sort of positives in terms of the early vote. What you're just seeing, though, in terms of the enthusiasm gap, Tom, so you can look at prediction markets. But we also like to look at sort of old school economy, old economy metrics. One is the generic ballot, just the difference between general view of one party over another. Democrats lead by D plus eight, D plus nine. And then the enthusiasm gap. And that oftentimes has translated into voter turnout. That's like Democrat plus 11 So those are both in wave territory. They're consistent with 2010

They're consistent with 2006

Those were waves in terms of the midterms.

Tom Keene (2:27)

The real problem here is I have no enthusiasm this morning. Those Canadians lost last night to the capitals with enthusiasm as Ira Jersey of Bloomberg Intelligence with Libby Cantrill of Pimco.

Ira Jersey (2:39)

So Libby, we're talking a lot about the federal government and the federal elections, but there's a lot of other state elections and the like that are also going on. And some of the major investment in AI is really being affected by decisions at the local and state levels.

Talk about those dynamics and how you're thinking about it at your firm from an investment perspective. Are there other things that we should be paying attention to outside of who holds the House and the Senate?

Libby Cantrill (3:07)

Yeah, I mean, at least for the foreseeable future, we think that policy will really be a state issue in terms of AI, and not a federal one, particularly if President Trump sort of stays consistent with what he's been talking about and how he doesn't want to necessarily regulate. That could obviously change. But the state level, this is absolutely on the ballot, and you're seeing 36 of 50 states are going to vote for their future governors. Many governors are running on an anti-data center in particular platform.

Many candidates in these races, both Democrat and Republican, I think this is the most interesting dynamic of all this issue. This issue is so bipartisan, that now you're seeing the gubernatorial candidates on both sides of the aisle advocate for pretty draconian policy responses. Lots of candidates, particularly in Ohio, where there's a lot of capacity that's in the hopper, if you will. Both governor candidates are advocating for full statewide moratorium. So I think that what we're going to see in 2027, I would expect, I just was saying this on air, politics leads policy, policy follows politics. The politics of this are very bad. And we're not necessarily endorsing that, but they're very bad. And so we're expecting more friction, more moratoria, more restrictions just in general. And that could definitely at least put some potholes in this AI story.