'No Chance' for Tax Changes but Expect Secure Act 2.0 Passage This Year

While there's "no chance" that any major tax changes could win enactment this year, according to Greg Valliere, chief U.S. strategist for AGF Investments, political watchers agree that Secure Act 2.0 retirement legislation will pass during the lame-duck session of Congress.

Lawmakers are pushing for passage of the sweeping retirement bill. On Tuesday, The Hill published an op-ed by Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Md., titled "Now Is the Time to Get Bipartisan Retirement Reform Done."

The two lawmakers championed their Retirement Security and Savings Act, which they said "includes dozens of provisions to help improve retirement security for all Americans." Most of the bill was included in the Enhancing American Retirement Now (EARN) Act, which was unanimously passed by the Senate Finance Committee in June, the lawmakers noted.

The Senate Finance Committee released the final text of the EARN Act on Sept. 8. The EARN Act will be part of the Senate's Secure 2.0 package, which must be reconciled with the House version.

The lame-duck session will be "jammed packed with the National Defense Authorization, marriage equality, the 2023 budget, Secure Act 2.0 and more," notes Jeff Bush of The Washington Update.

A spokesperson for the Insured Retirement Institute told ThinkAdvisor in a recent email that "We understand that House and Senate staff are communicating [about Secure Act 2.0 legislation] but we do not expect any significant movement until after the election."

IRI, the spokesperson said, "remains optimistic that Congress will pass Secure 2.0 by the end of the year."

Midterms and the Markets

With the midterm elections in full swing, political watchers are busy prognosticating what that means for the markets. "Advisors should prepare their clients for a tumultuous election count season with commensurate market volatility," Bush told ThinkAdvisor in a recent email. "There will be surprises in the elections; just be prepared."

In his recent Capitol Notes email briefing, Valliere noted that "the prospect of gridlock or a Republican tilt would be most welcome," and that "activist legislation would stall."

Raymond James analysts noted in a recent policy briefing that "since 2004, S&P 500 returns in the 60 days prior to US elections has been a sub-par, -1.0% on average, though this has generally been far worse for Presidential elections, and far better in mid-term election years."

That being said, the analysts continued, "this year's S&P 500 price return in the 60 days prior to the mid-term is ~-11% (so far), the worst performance since 1946 (no mid-term election year comes even close to this poor performance)."

House Will Flip

Valliere notes that the House call "is easy," with the only suspense being the size of the GOP victory.

"We'll stay on the low side, predicting that Republicans will gain 17 seats; they only need a net of 5 to regain control," Valliere wrote. "Some analysts are in the 20-25 seat range, but 17 would be a comfortable margin for new Speaker Kevin McCarthy to assert control."

Bush agreed that Republicans "are still favored to win the House. The question will be the margin of majority."

A small majority, Bush continued, "will make the speaker of the House's job very difficult. Each faction within the Republican caucus will have a loud voice in any measures the Speaker puts forward."

The Senate "has always been a close call," Valliere stated, "but momentum has swung to Republicans in several races, and there are numerous paths for them to win a net of one seat, which would give them control, ending the current 50-50 tie."

Bush noted that he expects Georgia's Senate race "to go to a runoff on Dec. 6" between Raphael Warnock and Herschel Walker. "This means we may well not know the majority of the Senate until early December."