The Underrated Value of Sentiment

The Underrated Value of Sentiment

By: Maxwell Reale, Capstone Managing Director

October 16, 2022 – With less than four weeks until the 2022 midterm elections, Capstone has been hard at work considering what policy issues will be at the forefront of the new Congress and how the Biden administration may adapt under various scenarios. This complex calculus includes the arduous task of counting votes, considering the variables of new leadership, and analyzing the sea of policy position papers submitted before the election. Another (often more valuable and underappreciated) part of this analysis involves attuning ourselves to members of Congress and regulators’ shifting sentiments ahead of the 118th congressional session and the 2024 presidential election.

The well-worn adage of “personality is policy” will hold especially true as the 2022 election welcomes dozens of new members to Congress and transitions leadership positions to previously more junior policymakers. But in our experience, personality is too often confused with ideology, and taken as a static view of a policymaker’s position, based on a narrow composite of historical statements. In truth, personalities are a complex representation of opinions to which ideologies bend and reshape themselves out of political convenience and necessity. And while there are some policymakers whose ideologies are so calcified that their personalities are too hardened to adapt to new information or voter demands, most members are creatures of sentiment—a reality we believe is often taken for granted.

But in our experience, personality is too often confused with ideology, and taken as a static view of a policymaker’s position… ideologies bend and reshape themselves out of political convenience and necessity.

While sentiment alone does not guarantee policy change—the pragmatic realities of fiscal policy and vote mathematics still play their part—it provides a powerful compass for where policy is likely to head long before any legislation is released or a vote is held. Sentiment among members on a particular issue provides us with multiple data points on an issue’s saliency – how will it be prioritized versus other issues? – and its trajectory – are policymakers’ opinions on the issue improving or deteriorating?

The sands are always shifting.

It is Capstone’s responsibility to translate changes in sentiment on major policy issues in healthcare, tax, financial services, immigration, technology, and energy into detailed probability-driven policy predictions with quantifiable corporate implications. While all eyes will be concentrated on polling and election results through early November, Capstone will be digging even deeper and wider, and we suggest companies and investors do the same. We will continue our dialogue with members, staff, and stakeholders to identify adjustments in sentiment, incorporate that data into our models, and translate them into profitable strategies for our investor and corporate clients ahead of and throughout the 118th congressional session.

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