HPS Welcomes Kriston McIntosh As Managing Director

Today, Hamilton Place Strategies (HPS) is proud to announce veteran public affairs strategist Kriston McIntosh is joining the firm’s Washington, D.C., office as a managing director.

McIntosh brings to HPS two decades of experience providing strategic counsel to Fortune 100 companies, nonprofit leaders, and members of Congress, including the Democratic leadership in the U.S. Senate and the late Congressman and civil rights hero John Lewis (D-GA). She will be joining HPS after spending six years as managing director of the Hamilton Project, an economic policy center at the Brookings Institution focused on developing solutions to create a growing economy that benefits more Americans.

“I’m incredibly excited that Kriston is joining our team, especially at such a dynamic time for our business and clients,” said Tony Fratto, founding partner of HPS. “The public affairs landscape is becoming increasingly complex and with issues of economic security top of mind for policymakers, Kriston’s deep understanding of the public policy and communications challenges ahead will be an invaluable asset to our firm. We’re all looking forward to learning from her.”

“Kriston is an innovative strategist with experience on issues that are important to our firm and top of mind for our clients,” said HPS partner Stacy Kerr. “Kriston has been in the field developing policy solutions with some of the foremost economic leaders. She is a leader with a proven record of building and managing high-performing teams, something that is critical to our culture at HPS. We are grateful and lucky that Kriston has chosen to continue her career with the HPS team. I look forward to bringing her perspective to our work.”

“I am thrilled to have the opportunity to work with the incredibly talented practitioners and industry leaders at HPS to advance the firm’s research-driven approach to solving complex client challenges. I look forward to applying my experience in the public affairs and public policy arenas to help HPS’ clients navigate an increasingly evolving landscape to meet their strategic communications and business objectives,” said McIntosh.

As the managing director at the Hamilton Project at Brookings, McIntosh elevated its profile with the media, policymakers, academia, and business leaders on key issues of economic inequality, education, and the racial wealth gap. She also authored op-ed columns on economic policy issues that have appeared in CNN, BBC, The Hill, The Detroit Free Press, and Real Clear Markets.

Prior to the Hamilton Project, McIntosh served as senior vice president at Edelman, a global public relations and marketing consultancy firm. For the Edelman Alliances practice, she managed a range of successful national public affairs campaigns on a range of issues including clean energy, telecommunications, and healthcare.

Previously, McIntosh worked as the staff director for the U.S. Senate Democratic Steering and Outreach Committee and as a policy advisor to Congressman John Lewis, advising him on labor policy and appropriations requests. Earlier in her career, she served as the legislative affairs manager at the United Nations Foundation and as a press secretary to Congressman John Conyers (D-MI).


What to Watch: Early Moves on Biden’s Economic & Financial Regulatory Agenda

Despite President-elect Biden’s historic victory, he will take office amid an increasingly polarized nation and closely divided Congress. Whether there is a Republican controlled Senate or a narrow majority for Democrats, the Biden administration will govern in an environment that will yield fewer legislative achievements. The dynamics of the already-looming 2022 midterm elections—numerous Republican Senators face re-election and historical trends forecast a number of House seats changing after the first two years of a new administration—add further challenges to the legislative landscape for economic and financial services policy issues. 

Therefore, policymaking at the agency level will likely dominate the first two years of Biden’s term. As the Biden administration transition begins to take shape, HPS took a look at some of the early financial and economic policy and personnel changes to watch at key federal agencies under a Biden presidency. 

Federal Reserve

While the Trump administration broke protocol by publicly trying to influence monetary policy decisions at the Fed—repeatedly browbeating Chairman Powell to lower interest rates—expect a Biden administration to revert to a more traditional relationship. This means respecting the independence of the Fed in setting monetary policy. 

In terms of personnel changes, the supervisory role of the Fed—which was empowered through Dodd-Frank—will be the most closely watched appointments in 2021, with significant consequences for regulated banks. Biden will be under pressure from anti-Wall Street activists in the Democratic Party, including Senator Elizabeth Warren, to appoint an aggressive regulator in this role. This sentiment will carry on to other roles too. While Chairman Powell has earned bipartisan praise for his handling of Fed policy throughout the pandemic, it is unclear if Biden will keep him at his post when his term expires in 2022. However, we can be certain that Randall Quarles, Fed Vice Chair for Supervision, will not be renamed to that post when his term ends in October 2021. 

Consumer Financial Protection Bureau (CFPB) 

President-Elect Biden’s administration and Democrats in Congress will make consumer financial protections a priority as the economy rebounds from the COVID-19 pandemic.  Biden will place an early focus on the CFPB, installing a new agency head who will be tasked with providing more robust oversight of the financial industry. We can expect the focus to be on fair lending, student debt, and customer banking fees. A recent Supreme Court ruling allows Biden to replace the current head of the CFPB with his own Director so we expect an announcement early in his tenure of a new leader here. He will face immense pressure from the progressive wing of his party to appoint a strong consumer advocate, however, a Republican-controlled Senate likely rules out more progressive choices and sets up an intense nomination battle.

Financial Stability Oversight Council (FSOC) 

After the 2008 financial crisis, FSOC designated several large nonbank financial companies for enhanced oversight. Under Secretary Muchin’s leadership, it has focused on risks posed by products and activities rather than individual firms—an approach Democrats have equated to deregulation. There’s also a push for the FSOC to recognize climate change as a risk to financial institutions and markets. Whomever is confirmed as the new Treasury Secretary will be a signal as to how the Council will govern, but the Council will certainly face pressure from House and Senate Democrats to return to a focus on individual institutions, to consider climate change as a risk factor, and to restrict how large banks spend capital as the economic recovery continues.

Federal Housing Finance Agency (FHFA) 

Unlike the other agencies, the future direction of the FHFA may not be up to President-elect Biden, but rather the Supreme Court. Next month, the Court will hear arguments in Collins v Mnuchin, a case that will determine whether the structure of the FHFA is unconstitutional. Legal observers expect that the Court will declare the single-director structure unconstitutional, as it did in an analogous case earlier this year relating to the leadership of the CFPB. If the Court rules as most observers expect they will, Biden will be able to fire Director Mark Calabria without cause, putting Calabria’s plans to release Fannie Mae and Freddie Mac from conservatorship in doubt. Since affordable housing is at the center of issues relating to racial and economic injustice—key issues Biden campaigned on—a Biden regulatory agenda at FHFA will build off the approach taken during the Obama years by prioritizing affordable housing.

Committee on Foreign Investment in the United States (CFIUS) 

The public profile of the Committee on Foreign Investment in the United States (CFIUS) exploded in the U.S. during the Trump Administration. The two nosiest examples include its role in Broadcom’s attempted takeover of Qualcomm and the TikTok saga. While some expect a return to the status quo ante in a Biden administration—lower-profile reviews, fewer interventions—don’t be so sure. As reflected in Foriegn Investment Risk Review Modernization Act, the 2018 legislation that formally expanded CFIUS’ scope, policymakers view data security risk as potential national security risk. That’s a huge, complex mandate. For the foreseeable future, CFIUS will remain prominent in the protection of U.S. national security interests in an increasingly connected world—no matter who the president is.

Department of Justice Antitrust Division 

Increased antitrust scrutiny in Congress and the Department of Justice has been a bipartisan affair in recent years, with much of the focus on the tech industry. This follows on years of too-big-to-fail break up the banks rhetoric in the post-financial crisis period, mostly from Democrats. The reality both then and now is that the law trails the political rhetoric, and serious breakups remain unlikely. However, these lawsuits can be major regulatory distractions for the leadership of companies and disrupt plans for growth and innovation. It is unclear which direction a potential Biden administration will take on this issue, whether they continue and ratchet up scrutiny amidst the domestic political grumpiness on tech, or if they commit energy in other directions and allow tech to continue competing as is in a dynamic and increasing global space. To read the tea leaves on this, look for authors of the Cicilline report moving over to the Justice Department, or not. That will be a transition hint of the policy direction to come.

Federal Communications Commission (FCC) 

The FCC will continue its work on rural broadband access and 5G deployment—areas of broad consensus among current Commissioners, Congress, and President-elect Biden. The FCC was already tepid in embracing Section 230 directly, and without pressure from the President, it is unlikely they would take any action to change the intermediary liability protections absent legislation. Net neutrality is the one area expected to change the most next year, and was the only issue mentioned in Biden’s Unity Task Force recommendations that referenced the FCC. Although the Obama Administration’s net neutrality order took a “light touch,” the Biden Administration is expected to be more heavy-handed in dealing with internet service providers not only through reclassifying broadband under Title II, but as part of broader reforms and enforcement of antitrust policy involving the DOJ and FTC as well. Biden will also have the opportunity to reshape the FCC in his first year, replacing as many as three of five FCC commissioners including the chair, and those nominations will communicate more than any policy statement how Biden wants the FCC to address these issues.

Federal Trade Commission (FTC) 

The incoming Biden administration is unlikely to make dramatic changes at the FTC. It is possible that none of the Republican appointees on the commission choose to step down, which would leave the Commission with a GOP majority until the fall of 2023. President-elect Biden could appoint a new chair from the Democratic appointees on the panel, but would technically still be beholden to a majority vote on most Commission business. That said, most majority chairs choose to step down following a change of control of the White House—in that case, a Biden appointee would tip the Commission towards a Democratic majority.

In a gridlocked Congress, a few FTC housekeeping items have garnered bipartisan support, including increased appropriations. Additional resources would likely be used to bring in technical experts to support the complex cases brought before the Commission.

The Commission maintains two goals: protecting consumers and promoting competition. Priorities in consumer protection, as laid out by current Democratic commissioners Rohit Chopra and Rebecca Slaughter, include further action on artificial intelligence and related algorithms, emerging technology like drones, and data privacy. The overall level of enforcement and investigation in the name of promoting competition is unlikely to change dramatically from the status quo, despite political rhetoric from Neobrandesians and progressives.


A Conversation With Jim Tankersley: The Middle Class Economy

From the 1950-70’s the American economy boomed and lifted millions of people into the middle class because we tore down the barriers that kept many women and people of color out of the U.S. economy, according to a new book by The New York Times reporter Jim Tankersley. He argues that the expansion of the economy to include the skills and knowledge of Black people, women, and immigrants not only helped create the strongest middle class in history, it catapulted the U.S. to become the preeminent world power and economic envy of the world. This inclusive economy also subsequently expanded opportunities for white Americans. The growth was halted in the 1980’s as new federal and corporate policies began to erode the middle class. In the words of Jim, this was the beginning of an American economy that “over the past few decades has left behind huge swaths of people.”

HPS recently had the opportunity to sit down (virtually) with Jim Tankersley, author of the new book, The Riches Of This Land, and tax and economics reporter for The New York Times. Jim has spent more than a decade covering politics and economics in Washington, and is an expert on the economics of the middle class.

During our conversation, which has been published as an episode of HPS Insights, Jim discussed his new book, detailing how the American economy flourished during the 1950-70’s, creating the strongest middle class in history because we removed discriminatory barriers that kept many people of color and women out of the U.S. economy. The growth was halted in the 1980’s due to new government and corporate policies and has since led to a steady decline in the American middle class.

Unfortunately, the economic fallout of the COVID-19 pandemic is only adding to the decline. As Jim told us on the podcast, those in the middle class were just barely starting to reach a full recovery from the damage suffered during the 2001 recession and 2008 financial crisis when the pandemic hit. The pandemic has caused — and will continue to cause — another period of devastating economic hardship, specifically amongst minority communities. As we begin to turn our eyes to recovery, Jim thinks it is critical that the economy is rebuilt with a focus on inclusive growth that will create not only a resurgent economy, but an empowered middle class.

In addition to the moral imperative, there is also an economic motivation for inclusive growth. As Jim noted, “The economy does best when everyone gets ahead. It is not a zero-sum game.” By empowering people to fully make use of their talents — unencumbered by discrimination — economic growth can be unlocked as individuals achieve their true potential. This starts with reassessing corporate hiring practices and instituting aggressive anti-discrimination efforts. Jim talked about the need to affirmatively ensure hiring pipelines are not exclusionary while simultaneously supporting employees once they have a foot in the door. He noted that many companies made big efforts in the 1960s as part of the Civil Rights Movement to diversify who they hired and it paid dividends.

Alongside anti-discrimination efforts, empowering women in the workplace, massively improving the access and quality of education, and reducing unnecessary regulations will be crucial to unlocking the next wave of economic growth. Specifically, taking a supply-and-demand approach to child care and quality could yield better results for working mothers, and eliminating anti-competitive occupational licensing requirements could make certain jobs more accessible to those who are qualified.

As Jim noted, these policies are not ideologically driven, and no matter where you come from on the political spectrum, there is an appealing route to solving these issues. As we look to the future, it is only through reexamining how the economy can be more inclusive that we can truly deliver socially just outcomes and economic growth for all.

To learn more, follow Jim on Twitter at @jimtankersley, listen to the podcast here, or go buy his fascinating new book.


The Unconventional Conventions: HPS Insights On The 2020 Party Conventions

2020 has been the year of the unconventional, and this year’s largely virtual Democratic and Republican conventions stayed on trend. Both conventions were mostly virtual, relying much more on pre-taped content than in years past, placing an emphasis on storytelling and showcasing everyday Americans from across the country. Despite the unprecedented format, both conventions stuck to campaign fundamentals—rallying their bases, playing up the candidates’ biographies, and engaging supporters as the campaigns move into the homestretch.

Overall ratings were down significantly from 2016, potentially reflective of the continuing decline in TV viewership and an increase in online viewers. Although President Donald Trump’s nomination acceptance speech closed the Republican convention with a RNC TV viewership high of 23.8 million, former Vice President Biden’s DNC acceptance speech viewership beat out the incumbent’s with 24.6 million people tuning in. In 2016, 32.2 million TV viewers watched President Trump’s speech, while Hillary Clinton’s nomination acceptance speech garnered 29.8 million viewers.

This doesn’t necessarily mean we will never see a convention like this again. The virtual format, and more dynamic experiences such as the DNC roll call from across the country, allowed a more personal experience. This was a welcome contrast from traditional conventions, where Americans have looked onto party insiders in funny hats milling about in massive arenas. While in-person events remain valuable for fundraising and building excitement, elements of the virtual format will likely impact party conventions going forward.

Aside from the obvious changes that the virtual conventions brought this year, contrasts on COVID-19, campaign personalities, and the convention endgames played into this year’s conventions.

Contrasts on COVID-19

The main issue of this year’s presidential election is the COVID-19 pandemic. But when it came to addressing the pandemic, the DNC and RNC were a tale of two very different conventions.

Through a completely virtual convention, candidates appearing in masks, and a lot of content about the pandemic, Democrats showcased themselves as the party of science. Speakers stressed the importance of listening to public health professionals and wearing masks. Biden and Harris both discussed how they would work to mitigate the pandemic on day one in office.

The Republican party, on the other hand, focused on putting the pandemic in the rearview mirror — regardless of what public health statistics say. Republican speakers spoke as if the pandemic was already over, with economic advisor Larry Kudlow referring to the pandemic in the past tense, and Vice President Mike Pence speaking with a woman whose small business was saved by the Paycheck Protection Program, without mentioning that the program shut down last month. This was underscored by President Trump’s acceptance speech on the South Lawn of the White House, complete with attendees sitting just inches away from each other, many not wearing masks.

It’s clear that Democrats and Republicans are making very different bets on the progress of the pandemic between now and November. As for which party made the winning wager, only time will tell.

Campaign Of Personalities

This year’s conventions focused heavily on the candidates behind the campaigns, not the policy issues themselves.

Though COVID-19 is still at the forefront of the election, speakers at the 2020 conventions concentrated their remarks on the vastly different characteristics and leadership abilities of Vice President Biden and President Trump. Character witnesses at the DNC talked about Vice President Biden as a principled leader with deep, bipartisan experience, while RNC speakers chose to highlight the president’s tough stance against foreign adversaries, China, and his business acumen making him the right candidate to lead America and continue his tenure in the nation’s highest office.

Deep policy issues were largely left out of the conversation at each convention. Similarly, we likely will not see the remainder of the presidential campaign season full of deep dives into the traditional policy areas: the economy and jobs; trade and foreign affairs; healthcare; and social issues. To be sure, the candidates will focus on the most important policy issues facing the country, namely the health and safety of the American public and a strong economic recovery. Take a look at Vice President Biden and President Trump’s respective campaign ads aired during each convention; most had to do with each candidate’s experience and attacks on his opponent. This year’s conventions followed suit, reflecting each campaign’s strategy to focus voters’ attention on the men running for president, not the policy issues. Though it is still early and two months remain before Election Day on November 3rd, the conventions largely foreshadowed the general election campaign strategy for both parties: forget policy, focus on the people.

Convention Endgames

Despite being virtual, the conventions largely hit their respective marks, albeit in different ways.

Democrats balanced their convention between their younger, more progressive ranks and their “old guard”—the long-time, more established Democratic flank. They even welcomed well-known Republicans to their party’s stage to appeal to the broader electorate, inviting former Ohio governor John Kasich and Cindy McCain, wife of late Republican Senator John McCain to speak to Vice President Biden’s character and willingness to get the job done. The vice presidential pick of Sen. Kamala Harris allowed Democrats to make the case against Trump. Others’ portrayal of Vice President Biden as an experienced, compassionate candidate enabled him to meet the high expectations placed on his acceptance speech, delivering what some regarded as the most important address of his political lifetime.

As for the Republicans, the RNC achieved the production value and enthusiasm they promised. Arranging the convention more like a television show, the GOP set a grandiose scene for its speakers, draping its ornate Andrew W. Mellon Auditorium stage in red, white, and blue bunting with American flags visible from all angles, playing to President Trump’s familiar arena setting. The GOP chose its speakers strategically, introducing more diversity than could be remembered in Republican conventions past, and focusing on a softer picture of President Trump throughout the last four years of his presidency. Not missing a chance to speak out against the president’s opponent, messaging on Vice President Biden took on his “too tough” stance on crime, while others spoke about his complacency in failing to condemn recent riots and looting. What some saw as inconsistent attacks, others viewed as “trademark Trump” capitalizing on weaker elements of his opponent’s campaign to energize the Republican base.

The real goal of this year’s party conventions was not to attract the most viewers, produce the best show, or even convince undecided voters. Ultimately, the goal was to energize the existing party base and get people ready to vote enthusiastically. For the most part, both parties catered to their respective bases and portrayed the candidates in the favorable ways their supporters see them. Though we’ve yet to unwrap our “October surprise,” the conventions are just the tip of the iceberg for the final two months of the campaign ahead.

If you would like to hear more, listen to our weekly podcast, the HPS Macrocast. We recently discussed the 2020 DNC and RNC on two episodes: Norm-Busting and Unconventional Convention.


Presidential Elections And Stock Market Volatility

Key Takeaways

  • Despite predictions of market volatility in presidential election years, there is little evidence that elections consistently trigger realized market volatility.
  • Although the VIX (“Fear Gauge”) illustrates an increase in implied volatility in the lead-up to presidential elections without an incumbent (2000, 2016) and in the most recent election where an incumbent lost (1992), there is little evidence of realized volatility.
  • While elections don’t significantly affect the broader markets, both general and primary presidential elections can drive spikes in realized volatility for the stocks of companies that could be impacted by potential policy changes.

The November presidential election is fast approaching, and while the outcome of the election is still unknown, many are already speculating about how the election will impact equity markets. For all the punditry and pontification, it’s worth looking at the data to answer a more basic question: Do presidential elections actually impact market volatility?

In our analysis of the past seven presidential elections we found that despite predictions of market volatility in presidential election years, there is little evidence that elections consistently trigger market-wide volatility in a real way. In some cases, the uncertainty of the election outcome may drive an increase in forward-looking implied volatility, as evidenced in the lead-up to presidential elections without an incumbent (2000, 2016), and in the most recent election where an incumbent lost (1992). But the impact on individual stocks is much more clear: Analyzing the stocks of specific companies that could be impacted by potential policy changes reveals a relationship between the election date and spikes in realized volatility.

The analysis below analyzes the CBOE VIX Index, and the 30-day realized volatility calculations are a measure of market volatility, and the expected and actual size as well as speed of price fluctuations in the market. This volatility is a natural feature of financial markets driven by many different factors and is neither inherently good or bad. This analysis does not map the positive or negative movement in stock price.

Presidential General Elections  

Looking back at presidential elections since 1992 shows a difference in perceived market volatility in elections with and without an incumbent victory. In the elections without an incumbent, and in the one instance where an incumbent lost (’92, ’00,’16), implied volatility, as measured by Wall Street’s “fear gauge,” the CBOE VIX Index, increased in the lead-up to the election, but there was no discernible pattern on the impact in actual realized volatility. Due to the outsized impact of the financial crisis on market volatility, 2008 data is excluded from our below analysis. Our analysis goes back to 1992 to span the past three decades of presidential elections.

Markets during elections that featured an incumbent victory (’96, ’04, ’12) lacked a clear trend in implied volatility, with elections in ’96 and ’04 experiencing a subsequent drop in implied volatility in the days following the election and ’12 experiencing a slight uptick in volatility. Similar to non-incumbent elections, there was no clear correlation in actual realized market volatility.

It is not until analyzing individual stock volatility that a trend in realized volatility becomes discernible.

Through an analysis of the industries highly impacted by candidates’ proposed policies in the 2016 general election and 2020 primary election, it is clear that election results can spike volatility for specific companies that could be impacted by potential policy changes. These individual volatility spikes do not, however, always translate into broad market volatility.

2016 General Election

In his 2016 campaign, President Trump pledged to revive the U.S. coal and steel industries. His victory sparked a sharp rise in realized volatility for these stocks.

Stocks of companies affiliated with transporting coal and supplying machinery for mining also experienced sharp spikes in realized volatility.

Facing the prospect of a reduction in government support from a new administration, renewable energy stocks experienced greater volatility following the 2016 election.

2020 Democratic Primary 

Specific sectors of the economy can also experience volatility surrounding primary elections. For example, spikes in volatility in health care equities corresponded with both the New Hampshire primary and Super Tuesday.

The central position of health care in the 2020 Democratic primary, the uncertain fate of the party’s nomination, and the primary’s potential impact on the general election outcome and policy implementation all likely contributed to an uptick in health care stock volatility.

The 2020 election is already unlike any other and its market impact is still unclear, but by looking back at the trends of past elections we can begin to try and make sense of what may come in markets in the months ahead. Analysts and commentators should resist the urge to predict doom or euphoria for broad equity markets as the 2020 results roll in.

Sources: Bloomberg Terminal, YahooFinance!, Real Clear Politics

Methodology:  Realized volatility is an historical metric measuring past market fluctuations. This is different from implied volatility, which measures investors’ expected future volatility.

Realized Volatility Calculation: Volatility is determined by taking the standard deviation of the percent change of S&P 500 closing prices and multiplying the square root of the average number of annual trading days.

Implied Volatility Calculation: The Chicago Board Options Exchange produces the real time VIX index to measure investors’ expected volatility over the upcoming 30 days.