The biggest predictions in politics next year

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0:36Marc Filippino: It's hard to pick the biggest moment from this year. I, Donald John Trump, do solemnly swear. I, Donald John Trump, do solemnly swear. The Trump administration is rehiring hundreds of federal employees after their jobs were cut by Doge. The clock is ticking down to a vote in the House of Representatives that would bring an end to the nation's longest shutdown. But we're going to try and we're going to take a look at what comes next. So, Donald Trump, since I know you're watching, I have four words for you. Turn the volume up.

1:22Marc Filippino: This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all the things happening in U.S. politics, finance and the economy. I'm Mark Filippino. And this week we're asking, what happens next in American politics in the new year? Here with me to discuss is Derek Brower. He's the FT's U.S. News Editor. Hi, Derek. Hi, Mark. And we've also got Lauren Fedor, the FT's Deputy Washington Bureau Chief, back with us. Hey, Lauren. Hi, Mark. Derek, you see all the day-to-day news operations of the FT in the U.S. In a word, how would you describe the past year in American politics?

1:56Marc Filippino: And be kind.

2:01Tiring. There are other words. Relentless. Sleepless. Shocking. Cruel. Cruel, I guess. Insatiable. Insatiable. Relentless, probably. Lauren, what about you?

2:14Lauren Fedor: Derek took my word. When he said tired, I thought relentless is just a synonym, but I would say tumultuous.

2:20Marc Filippino: And just to follow up on that, was there a moment in Washington that's a good example of that word in practice, any scene that you can remember that really highlights that tumult?

2:30Lauren Fedor: I think maybe for FT readers and listeners, the start of April, Liberation Day.

2:36Marc Filippino: The tariffs.

2:36Lauren Fedor: The image of the president holding up those signs and announcing this kind of new era of trade policy. I think that might have been a defining moment. I don't know what you think, Derek. Yeah, Derek, what do you think? I agree. I mean, there were many, there were many, but Liberation Day was special for us just because, you know, at the time from New York to San Francisco to people in Brussels, you know, everybody in the FT and our readers were focused on that one day. And he went way beyond what anybody was expecting. The tariffs were shocking, the severity of them was much more extreme than anybody expected, including most of our commentators.

3:18And that was just such a moment. And then we had, what, two and a half weeks of market chaos after that.

3:25Marc Filippino: Yeah, something like that. Okay, I want to do one. And my word is bizarre. And I guess what I'm thinking about here is Trump's feud with Fed Chair Jay Powell over lowering interest rates. Trump's visit to the Federal Reserve's headquarters last July is probably the best example of how weird things got. There's a video of them standing in, you know, little hard hats, basically arguing over the cost of a renovation project. So we're taking a look and it looks like it's about$3.1 billion.

3:54Lauren Fedor: It went up a little bit or a lot. So the$2.7 is now$3.1. I'm not aware of that. Yeah, it just came out. I haven't heard that from anybody in the Fed.

4:06Marc Filippino: In that moment, it was part of this larger pressure campaign. And this pressure on the central bank to lower interest rates was something that we have not seen for a very, very long time in America.

4:18Lauren Fedor: I mean, the optics of that were just incredible. I mean, I think, you know, we throw around a lot of superlatives, I think, when we talk about what's going on in Washington these days. But I do think my jaw was literally agape watching that and the kind of image of them with their hard hats and the president making claims and Jay Powell putting on his reading glasses and taking the paper out of his kind of suit jacket and reading it with him all in front of the cameras was, as you say, totally bizarre. Yeah. And told you a lot, I think, about how this administration operates. Did you go ahead?

4:54Can I check into the, now that we're on the bazaar? The cabinet meetings. I mean, in the first time, Trump's cabinet meetings were similar. But these days, they are very unusual.

5:06Marc Filippino: Especially when Elon Musk was in the, I know he wasn't part of the true cabinet, but him being there in the Oval Office was absolutely surreal. That was a time that we will look back on. I mean, we're looking back on it now, but in five, 10 years and just be like, was that something that actually happened in American politics for a bit?

5:24Lauren Fedor: Or maybe it will be the new normal. Maybe our children will be looking at the history books, Mark, and thinking, oh, well, that's just how things work these days. The billionaires are right up there with the president.

5:37Marc Filippino: So we just took a look at 2025. Let's move on to this year, 2026. One of the main stories will once again be around monetary policy. Powell's term as Fed chair will be up in May. Trump will appoint a new Fed chair at some point. What do you guys think about the story of Fed independence and monetary policy as we enter the new year? Dorian, do you want to go first? Do you want me to do it?

5:58Lauren Fedor: Well, you know, all of this is going to be proven wrong, I'm sure, in a matter of weeks when the president announces his pick.

6:06Marc Filippino: And by the way, the markets, just so we have it on tape, the markets are pricing in two quarter point cuts for 2026.

6:13Lauren Fedor: Maybe you should have had Clara Jones, our economics editor, in here to talk you through the dot plot. Yeah, exactly. Talk you through the dot plot. But I mean, I will say that my not very good joke that I've said to people now when they ask me who the next Fed chair is going to be is that it's probably going to be a guy named Kevin. Covers my bases, except with President Trump, you know, it's not going to be either of Kevin Hassett or Kevin Warsh. It'll be someone else. And you'll play this back for me. Maybe Donald Trump. Who knows? Maybe Donald Trump, maybe Scott Bessent, the president's clear kind of dream that he keeps joking about, but maybe not really joking as he ribs the Treasury Secretary about possibly taking on a dual role.

6:55Lauren Fedor: I think, you know, whatever happens, there will be a lot of pressure on that individual to cut rates further. And I think that it will be interesting to see how much that individual responds or doesn't respond to public berating from the president of the United States. Derek? We think it's going to be either Chris Waller, who's a member of the Federal Reserve Board. He's more of a conventional governor on the Fed. Or it's going to be Kevin Walsh, who is a former member of the Fed and is a trained economist. He's got a background on Wall Street. He's respected on Wall Street. Or it's going to be Kevin Hassett, who's the senior economic advisor to Trump at the moment.

7:41So, and very much a Trump ally. It's probably going to be one of those three. The question of independence for the Fed is going to be one that endures throughout the Trump presidency, because he's made it clear that he doesn't really believe in that concept. On the other hand, as Jay Powell, the current Fed chair, has shown, just because Trump says something needs to happen doesn't mean the board of the Federal Reserve all agrees and makes it happen, because interest rate cuts are put to a vote and they need to have a majority and so on. So it's not that easy, even if he picks a very close ally, even if that person is the most stalwart ally and some extent may even spook markets because he is so close to Trump and wants to please Trump, even if that is a case.

8:29The Federal Reserve is a pretty staid institution that decides policy by vote. And there are a bunch of other people who can outvote the Fed chair. So that's going to create more conflict. Remember, Jay Powell is somebody that Donald Trump appointed, and now he calls him all kinds of horrible names. Disagrees with his monetary, his approach to monetary policy, blames him for where interest rates are at the moment, even though it's, as I say, it's put to a vote to the board.

8:57Marc Filippino: All right, guys, I think this is a good place to stop for now. We're going to take a quick break, and we will be back in a minute.

9:33Marc Filippino: Thank you.

9:45Marc Filippino: All right, last one. Democrats rejoiced in November when they took home some victories in an off-year election. Next year, this upcoming year, will be the midterms, which I know everybody's psyched about. Will the luck for the Democrats hold up?

10:02Lauren Fedor: Well, luck implies that they haven't done much to bring about these wins. That's fair. What happened to them rather than something that they've achieved. I do think that the wind is in the Democrat sails heading into this year. There are a lot of indicators that are stacking up in their favor. They obviously had these wins in places like New Jersey and Virginia, as you mentioned, last November. But 2025 was really a year of victories for them in special elections, in state and local elections. And I think that a lot of that is obviously a voter response to what they've seen from the White House.

10:41Lauren Fedor: But I think that an energized, I should say it's a voter, it's the voters responding and pushing back to things that they don't like coming out of the White House. It is a sign that perhaps the Democratic base is energized, even at a time when there's a lot of infighting within the party about its direction and who its standard bearer should be. But I think that you can't escape at the end of the day, and it's a cliche that it's the economy stupid, and that people don't feel good about the economy and their personal economic situation in this country. And we've spent a lot of time in the last couple of weeks writing about Donald Trump's struggles in terms of messaging on issues of affordability and the cost of living.

11:27Lauren Fedor: It's being borne out in the polls. His approval ratings are at an all-time low, but his approval ratings on handling of the economy, which has traditionally been his calling card, are also low. And I think that unless the president and congressional Republicans can figure out a way to reach voters on this, then the Democrats might be lined up for a pretty good November.

11:51Marc Filippino: Derek, I think that the most intriguing thing to me is that Lauren said is who will basically hold the torch and lead the Democratic Party. And I think the thing that elicited that discussion was the election of incoming New York City mayor, Zoran Mamdani. And there's a real split over whether or not his progressive policies should be the thing that Democrats reach for over the next year or if they should stay toward the middle as they have over the past couple of elections. I'm curious to know what you think. Is there a clear path for the Democrats? Yeah, that's a really good question because there is a trap actually that's there for the Democrats.

12:33If they get bogged down in some kind of internecine dispute over whether the party should go down the Mamdani ultra-progressive route or the Mikey Sherrill route, she just won the governor's race in New Jersey and she's much more of a centrist. And so if they get bogged down in this kind of conflict over progressive versus centrist stuff, then they may lose a bit of their momentum. The election showed that even though the party is still pretty riven over those kind of issues, even with that possible debate loitering in the background, they have a lot of opportunity just because Trump keeps making unforced errors, which are unusual for him.

13:16And he really seems not to be kind of grasping the nettle with this at the moment.

13:21Marc Filippino: And sometimes actively mocking the issue of affordability. The idea that this guy who seems so in touch with the mood of the country while he was campaigning last year, now at the time when people are complaining about the high cost of living and affordability crisis and so on, is boasting of his new gilded toilet in the White House and hit the ballroom that he wants to make and the billionaires who are going to arrive on their golden visas and so on. It's just kind of tone deaf. And I think that is a real opportunity for the Democrats, even if they get bogged down in their own debates about who they actually are.

13:53I don't think it's clear yet. I mean, I'd be interested to know if Lauren has a sense of this, but I don't think it's clear yet who is going to emerge as the carrier of the flame, whether it's Gavin Newsom, governor of California, whether it's Josh Shapiro or the governor of Pennsylvania or a Mamdani type figure.

14:13Lauren Fedor: Alexandria Ocasio-Cortez. A question would be like hanging over the midterms as well. Sorry, Lauren. I said someone like Alexandria Ocasio-Cortez, right? Right. But I think that, you know, if we're looking at the coming year as a whole, I think that you're going to see some of that, whether you want to call it infighting or debate happening in the next couple of months with a whole batch of primaries across the country. Remember that there have to be primaries in all of these House seats if there is more than one candidate vying for the party's nomination. So I think you're going to have all of these kind of smaller tests playing out across the country between left and center, maybe older and younger candidates as well.

14:55Lauren Fedor: And as the spring rolls into summer, I think we're going to have a much fuller picture, perhaps, of where the trends are and what the base is clamoring for. But I think then when you skip ahead to the end of the year, you know, we spend a lot of time, obviously, Election Day will be in November and that will be decisive in terms of determining who controls both chambers of Congress. But, you know, the day after the midterms, this one I feel confident predicting, no sooner than the day after the midterms will everyone's attention be turning to 2028. The one thing I would say as well, I think next year will be really interesting to see what happens with Latino, Hispanic voters in the midterms.

15:35Because it was only a year ago that we were talking about this amazing success of Donald Trump in capturing a bigger share of the vote from those communities. And maybe there were generational or structural reasons to do with conservative values and so on. Well, it doesn't look like that now. And it turns out that all these ice raids in those kind of communities maybe aren't so popular. Maybe there's a backlash against that. And so watching how that vote shapes for the midterms will be really interesting and then really instructive for the 2028 candidate contest as well.

16:12Lauren Fedor: I completely agree. And, you know, back to the New Jersey example, that was a really clear case of where there was quite an aggressive swing among Hispanic voters back to the Democrat from Donald Trump just a year earlier. However, I think it's important that we remember, and I know I mentioned Donald Trump's approval ratings, and this year has been, at the start of our conversation, we were talking about images. We haven't even really touched on the fact of how many kind of shocking images and videos of these ICE raids that we've seen across the country and some really heart-wrenching stories.

16:47Lauren Fedor: And yet, immigration remains the issue for which Donald Trump has the best approval ratings. Yeah. He still is rewarded by voters for this. And in fact, the majority of Americans say they like what he is doing when it comes to illegal immigration. So I guess I would just caution that sometimes I think we can fall into a trap of assuming that is hurting him politically when in fact it may even be helping him. Yeah.

17:14Marc Filippino: Yeah. All right, guys. One last question. I'm not going to ask you to make any bold, specific predictions. But I will ask you if there's any topic or person that you're following actively going into 2026. Issue-wise, I think we're going to see an AI backlash. And I think it'll be very important to markets. It'll be important to the politics. I do not think there are many votes among my kind of relatives who are conservative Christians for people who associate themselves with the tech bros and the AI chatbots turning into alternative relationships for young men or telling kids to commit suicide or whatever.

18:01I just think this backlash is brewing, and I think it'll be a political issue, and I think it will start to be picked up by, it already is being picked up by some of the politicians who feel more in touch or try to show that they're more in touch. People like Josh Hawley on the right, for example, who's been very outspoken against AI. by Bernie Sanders is already speaking out against these tech oligarchs, I think, as he calls them. So I think that's one issue that I'm going to watch. I'll just throw one other out there that is just that, I mean, it kind of touches on the 2028 contest, but Donald Trump is a lame duck.

18:36And so he is a lame duck president and the race will be on to replace him. And that is going to be absolutely fascinating to watch.

18:43Lauren Fedor: Picking up on what Derek has said and with an eye to 2028, I think I will be very interested in all of the faces that sit around that cabinet table for the president. I think, you know, we talked about the tumult of this administration. Nice.

18:57Marc Filippino: Nice callback.

18:57Lauren Fedor: But actually, one area of, I would say, surprising stability has been the composition of his cabinet. For the most part, President Trump got the cabinet that he wanted. I think maybe Matt Gaetz for attorney general is the only one that he really wanted that he didn't get. But he was able to push through some or muscle through some pretty controversial confirmations. And then a lot of his cabinet members have faced a lot of pressure. And yet they're still there. I'm thinking about Attorney General Pam Bondi, FBI Director Kash Patel, HHS Secretary, RFK Jr. I mean, the list goes on. But he has actually kept all those people in place.

19:38Lauren Fedor: I think it'll be very interesting to see if he reshuffles that cabinet in the new year. if Susie Wiles stays on as his chief of staff. And then with that eye to 2028, how some of those people might position themselves to be his heir apparent. So watching how those individuals in particular start to position themselves for what might come next, I think will be fascinating to see in the next couple of months.

20:04Marc Filippino: Absolutely. I think that's right on the money. I'm going to wager, not a prediction, but something that I am focusing on. And I think it's just very FT. And it's the economy. The dust, hopefully, will be settling on a lot of the issues that we've talked about. Tariffs will have set in. Interest rates, those cuts, will have made their way through the economy. And we'll see whether or not tariffs are impacting inflation. If they're offset by a strong economy, that is kind of the goal of these interest rates being cut. But all these things, I think, we'll get a clearer picture of as we get further into 2026 after a year of complete economic chaos.

20:46Yeah, Mark, I think you're absolutely right, actually. I mean, the politics are one thing, but the economy could change those politics dramatically. And if there's a crash, which there are many voices on Wall Street now saying we're in a bubble, this has to burst at some point, and the affordability thing is not dealt with, this is a political problem for Donald Trump in particular. and whoever wants to carry on his mantle. And does that change the idea of J.D. Vance? Does J.D. Vance go out there and does he try to break with what Trump's done on the economy? Who knows? But the economy could be the thing that decides all of that.

21:20It's a very FT thing to say. There's all these things that we haven't seen happen, big moving parts for the U.S. economy that are going to happen pretty much all at once or in the course of several months. And we'll see their impact. Good luck predicting any of it next year.

21:36Marc Filippino: Well, I'll see you guys in a year's time and we'll reflect back on this conversation. Maybe not warmly, but we will reflect. How's that? I want to thank our guest, Derek Brower, the FT's U.S. News Editor. Thanks, Derek. Thank you. And Lauren Fidor, she's our Deputy Washington Bureau Chief. Thank you so much, Lauren.

21:54Lauren Fedor: Thanks for having me.

21:56Marc Filippino: All right, guys, no exit poll this week. I want to wish everybody a safe and happy holiday season.

22:09Marc Filippino: This is Swamp Notes, the U.S. politics show from the FT. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in the show notes. Our show was produced by Henry Larson. It was mixed by Sam Giovinco. And special thanks, as always, to Pierre Nicholson. I'm your host, Mark Filippino. Our acting co-head of audio is Topher Forges. Original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times.

22:35Thank you.

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23:44Marc Filippino: Visit schwab.com to learn more.