A Pew Research survey put roughly 80% of American voters on the negative side of artificial intelligence, mostly over job losses. Libby Cantrill, who runs public policy at PIMCO, said that number is why data-center moratoriums are now state politics.
The market treats Washington as noise. Cantrill's case is that this is mostly correct for headlines and mostly wrong for two specific things: the oil market's assumption that supply disruptions resolve themselves, and the chance that Congress, having done nothing on artificial intelligence, eventually does something blunt.
"AI is kind of becoming a new boogeyman in Washington"
Cantrill has spent 20 years at PIMCO and worked on Capitol Hill before that; her job is to tell the firm's traders which political headlines are actionable and which are not.
The full interview is covered here so you can skip it. 49 minutes of audio, 14 minutes of reading.
Here are the 11 takeaways that matter.
👤 Guest: Libby Cantrill, Head of Public Policy at PIMCO, who advises the firm's portfolio managers and clients on which political developments are tradable, and who worked on Capitol Hill before joining the firm 20 years ago
🎙️ Host: Liz Thomas, Chief Market Strategist at SoFi, who writes the On the Money column for SoFi's newsletter
📰 Published: 16 September 2026 on YouTube and the show's own feed
🔴 YouTube | 🟣 Apple Podcasts | ⏱️ 49 min | ✅ Time saved: 32 min
Key Takeaways
PIMCO's base case for November is a Democratic House and a Republican Senate
Republicans hold the House by three votes, and the party out of power wins 26 seats in an average midterm
The Senate seats up this cycle are in Texas, Alaska, Iowa, Ohio, North Carolina and Maine
Split government usually calms the bond market, and she does not expect it to this time
The one thing President Trump and Democrats agree on is spending more
The oil market is underpricing supply risk, and the government's main lever is nearly spent
The Strategic Petroleum Reserve is at its lowest level since the early 1980s
Roughly 80% of voters hold a negative view of artificial intelligence
New York's governor pushed through a one-year moratorium on data centers
The unpriced risk in the AI trade is Washington overreacting after doing nothing
A president can restrict open-weight models on national-security grounds without Congress
A projected 20% cut to Social Security benefits in 2031 is what she thinks forces a deficit deal
The 1983 precedent is the Greenspan commission, whose changes Congress passed
The Fed has three guardrails, and the chair is only one vote of 12
Voters are angry about the price level, not the inflation rate
The effective US tariff rate went from about 2% to 10-11%, and the administration wants 14% back
PIMCO is positioned for a steeper curve: underweight the long end, overweight two-to-seven years
1. Why Headlines Don't Move It
Thomas opened on the thing that has been puzzling her: markets watch politics closely and then decline to react to it.
Cantrill said the answer depends on where the investor sits. European and Asian clients respond to political headlines far more, which she put down to an asymmetry of information — they are further from Washington and more inclined to overreact, even if they do not move their portfolios.
Domestic investors have been what she called sanguine about the Iran conflict, oil inventories, the oil price and the effect on consumers.
Her explanation is repetition. With this president and previous ones, positions get stated and then pulled back: "So I do think the markets have become a bit impervious a bit more desensitized."
The second explanation is crowding out. Artificial intelligence and the consumer have been the big story, and she said that story has in some ways drowned out the political risk.
Sorting the two is her job description. She said she helps clients and PIMCO's traders "discern what is actually actionable" and separate it from what she called the general noise.
PIMCO wants the volatility rather than fearing it. As active managers, she said, an environment with a lot of uncertainty is one where the firm can "make alpha for our clients."
2. Oil Is Underpriced
The one market she named as mispriced on political risk was oil.
"I think our view is that the oil market in particular is probably underpricing some of the risk." She said the market has assumed things go back to normal.
The Strait remains closed as of the recording, and while she believes the president wants a deal with the Iranian regime, she said nothing looks imminent.
The government's main relief valve is close to empty. The Strategic Petroleum Reserve, she said, is not exhausted but sits at its lowest level since the early 1980s.
The sanctions lever has been used in both directions. Sanctions on oil were rolled back and have since been reimposed, which she said leaves fewer tools in the box.
The conclusion is a trade, not a warning. As active managers, she said, PIMCO can take the other side of an underpriced risk.
3. Angry Voters, More Spending
Thomas asked what the signal is behind global populism and the rejection of the political norm. Cantrill gave two connected trends.
The first is anger that is not partisan. "They're angry with the political class. They're angry with both parties, by the way. They're mad that gas is more expensive."
The primary season showed it. With the primaries nearly finished ahead of the November midterms, she said the pattern has been a rejection of incumbents on both sides of the aisle.
The second trend is that the only answer politicians offer is spending. She said she worked on Capitol Hill years ago and watched the same cycle: the minority party claims fiscal responsibility, wins power, then spends or cuts taxes.
Thomas asked what the limit is. Cantrill said the United States holds a rarified position because the world transacts in dollars, which puts a premium on the dollar and on Treasuries — but that the position is not permanent: "We've seen reserve currencies come and go and sort of the cycle of history."
The limit is already visible in the price of long-dated debt. Investors are demanding more yield to hold longer-term Treasuries, in the United States and across developed bond markets, and she was explicit that this is compensation for risk rather than a default call.
4. Prices, Not the Rate
Asked what voters will take to the polls, Cantrill said affordability, and Thomas built out the arithmetic behind it.
Thomas's explainer is the clearest statement of the gap between the data and the experience. "So maybe it's not inflating at 9% anymore, but it's still inflating at about three and a half percent, which means prices are getting higher." Wages, she said, are not keeping pace.
Cantrill's addition is that the level matters more than the rate. "But if you're kind of an everyday consumer who has no idea what kind of a CPI or PCE is, what you see is that prices are still going up."
Moderating inflation is good news for a bond manager and irrelevant to a household comparing today's prices with five or ten years ago.
The burden is regressive, item by item. She named gasoline, health care and housing, and said higher mortgage rates have made housing less affordable still.
Her summary of the politics: "We call it inflation. People call it affordability. People call it cost of living. People are angry about prices."
5. The Steepener Trade
Thomas asked what PIMCO changed in its process over the past few years. Cantrill answered with positioning rather than philosophy.
Political risk is one input among several. She listed liquidity risk and credit risk alongside it, and said the firm's job as a fiduciary is to get paid to take risk.
The firm's biggest theme has been steeper yield curves, in the United States and globally, driven by investors demanding higher yields at the 30-year end.
Thomas translated it for the audience, defining the short end as two years and below, the long end as 10 years and beyond, and a steepening curve as the gap between them widening. She noted the 30-year Treasury yield has been above 5% for its longest stretch in about 20 years.
The expression is underweight the long end, overweight the middle. Cantrill said PIMCO is positioned underweight the long end and overweight what she called the belly, roughly two to seven years.
The distinction she drew is between taking interest-rate risk and choosing where to take it. As an active fixed-income manager, she said, the firm may want interest-rate risk but will be very specific about where on the curve it sits.
6. Three Guardrails on the Fed
Thomas asked whether voters believe the Fed is independent, and whether that is another source of anger.
Cantrill said the Fed gets demagogued by voters, but that independence matters to markets rather than to the ballot box — and that concerns about it translate into higher interest rates and higher mortgage rates, which reach voters indirectly.
PIMCO's view is that the Fed is independent for all intents and purposes, and she laid out three structural reasons.
The first is the committee. "So the chair of the Fed, Kevin Warsh, is one of those voting members, but he's only one vote. He needs six other folks to go along with him in order to change monetary policy." A majority of the 12 voting FOMC members is required for rate and balance-sheet decisions.
The second is Senate confirmation. The president nominates and the Senate gives advice and consent. She said the Senate has been asserting that oversight role, with back-channeling between it and the White House, so a highly political nominee would not reach 50 votes.
The third is the market itself: "So if the Fed is perceived as not being independent enough, the market will react." She said the bond market has already shown it responds when independence is in question, and that she hopes the worry is now in the rearview mirror.
On the new chair, Thomas relayed a line she had heard: "We're just dating Kevin Warsh right now. We're in the dating phase." She said his refusal to give forward guidance is unsettling the market, that the Fed had been giving too much information before, and that "I think Jerome Powell agreed, but he was stuck."
Cantrill's read is that Warsh wants to be a change agent. "I think Kevin Warsh came in really wanting to be sort of a change agent wanting to be disruptive," constrained by the same committee dynamic. On fewer press conferences and less guidance, she said PIMCO welcomes it, because more volatility is good for active managers.
7. A Split Congress
Asked for the base case, Cantrill gave it without hedging.
"So, not to bury the lead, our base case is you're going to have a split Congress, a Democratic House and a Republican Senate."
The House arithmetic favors the Democrats. All 435 seats are up. Republicans hold the majority by three votes, and the average number of seats the out-of-power party wins in a midterm is 26 — so Democrats need an acceptable-to-good night, not a wave.
The Senate arithmetic does not. A third of the 100 seats are up, Republicans hold a four-seat majority, and the seats in play are in Texas, Alaska, Iowa, Ohio, North Carolina and Maine. "So, the Democrats I would sort of characterize what they would have to have a perfect night in order to take back the Senate."
Even winning it would not give them a governing majority, she said — a one-seat margin limits what can be done.
The policy consequence she flagged is nominations. A narrower Republican Senate majority makes it harder to confirm anyone controversial, which she described as another constraint on the president.
On gridlock: "We hear a lot the market's like gridlock because really that means sort of status quo."
8. Don't Trade the Election
Thomas raised the historical pattern of midterm-year drawdowns and the sectors that hold up, and disclosed her own position.
Thomas said consumer staples and health care tend to do well through midterm-year volatility, with health care historically the best-performing sector — which she said has always confused her, given how often health care is an election-season target. She added that she is bullish health care for reasons unrelated to the midterms.
Cantrill's answer was that trading the election is "a little bit of a fool's errand."
She does not expect the usual election-year stimulus. "I think there has been this view that in election years you will get some priming of the pump," and she said that is unlikely this cycle: the president's ideas — lowering or indexing capital gains to inflation, raising the mortgage interest deduction — all require Congress, and Congress has not legislated much since the one big beautiful bill.
On the drawdown question, she declined to forecast one but said an election cycle layered on existing worry tends to make it worse. The market's concern, in her account, is that a resilient consumer may be slowing, and that credit and other equity-like sectors would reflect that.
Markets usually do well in the third year of an administration, the year after the midterms, whether as a relief rally or coincidence.
The bond market's usual reward for split government is the one she withholds. Split government normally means less spending and calmer deficit worries; this time, she said, the one thing President Trump and the Democrats agree on is spending more — defense from the president, non-defense as the Democratic price for it.
9. The 2031 Forcing Mechanism
Thomas asked what happens to the national debt from here, and whether a split Congress just means kicking the can.
Cantrill expects nothing to change in the next two years, and expects deficits and debt to be a real topic in the 2028 presidential cycle on both sides.
Her evidence that they were absent last time is specific. She said that in the 2024 debates, between Kamala Harris and President Trump and between Joe Biden and President Trump, there was not one mention of deficits or debt.
The date she is watching is 2031. The Social Security trust fund's own actuaries project the program will have to reduce benefits by about 20% then, because it is a pay-as-you-go system with fewer people paying in. She flagged that the projection moves and should not be taken as gospel.
That lands inside the next administration, whoever wins in 2028.
Her theory of Congress is that it acts only under pressure: "So as long as the music is playing, they'll kind of keep on dancing. But once the music stops, I do think that members of Congress will respond."
"And the risk of voters being really mad about Social Security cuts would be, I think, a forcing mechanism." Once Social Security is open, she said, Medicare and revenues could follow — a version of the grand bargain President Obama negotiated with Republicans and never closed.
Thomas asked whether younger voters care, given they have been told their whole lives it will not exist for them. Cantrill said turnout settles it: "Well, of course, older voters vote at a much higher rate than younger voters." She added that the affordability anger has a generational component of its own.
The historical precedent she gave is 1983. "If you go back to the early 1980s, the social security trust fund again was going to go bankrupt, paying out less than it was taking in." A bipartisan commission chaired by Alan Greenspan, before he ran the Fed, proposed dramatic changes and Congress passed them — in a less polarized era without a 24-hour news cycle.
Her verdict on the Department of Government Efficiency is that it failed on process, not intent. Cutting the deficit should be something Americans want, because it means lower interest rates and borrowing costs. But the effort was run in isolation from Congress, and she emphasizes the point to clients overseas: "But at the end of the day, it is Congress that actually writes the laws, has the power of the purse, and so the president is just going to be invariably constrained by the Constitution."
Thomas pushed back that this administration finds ways around the checks. Cantrill said her clients say the same and that the record says otherwise, naming tariffs, Fed independence and birthright citizenship under the 14th Amendment as cases where the courts clapped back. Discretion in how laws are written gives every president flexibility, she said — under Biden, Obama and Bush as much as now. "I think that we all as Americans, regardless of what your politics are, you should feel good that actually the checks and balances are working."
10. AI as the New Boogeyman
Thomas turned to data centers, energy and the local politics now forming around them.
The survey number is the anchor: "80% of voters have a negative view on AI," from a Pew Research report, driven by potential job loss.
The complaint is not one thing. She split it into the infrastructure — water use, electricity prices, noise, quality-of-life burden around data centers — child protection, on the model of social media, and the existential worry about jobs. "So it really kind of goes from the prosaic to kind of the existential if you will."
Governors are already acting. She cited New York's governor putting through a one-year moratorium on data centers unilaterally, since recast as a pause while a framework is built to give communities assistance and legal protections. She expects more governors to feel they have to do something.
The market risk she names is federal inaction, not state action. Congress and the president have done little, she said, and the administration wants a light regulatory touch to compete with China.
The mechanism is overcorrection. The longer Congress does nothing, the higher the chance it acts late and bluntly. Her analogy is Dodd-Frank: Congress left the mortgage industry alone, the financial crisis arrived, and the legislation that followed took years and was imperfect.
"AI is kind of becoming a new boogeyman in Washington" — and the risk is that policymakers skip the thoughtful work and reach for something draconian once the politics turn.
The path that needs no legislation is national security. She said courts have historically deferred to presidents claiming national-security grounds, so a moratorium on open-weight models, or a requirement that models pass through the administration for something like a right of first refusal, would probably stand. That would hit earnings and sentiment.
Thomas named it as the risk nobody is modeling. Investors are focused on whether earnings disappoint or capital spending slows; the unconsidered risk is that Washington gets involved and that is what clamps down capital spending and earnings.
Cantrill said her own view has moved. Three months ago she would have said it was not possible under this president; now she calls it an open question, because he cares about the mood of voters and about the rivalry with China. It is not the base case by any stretch, she said, but it is a risk she does not think is being priced.
11. Tariffs Go Back to 14%
Thomas noted Cantrill had said before the show that tariffs are less interesting now but there will be more of them.
The numbers she gave: an effective average tariff rate of about 2% in January 2025, around 10% or 11% now, and 13% or 14% earlier this year before the Supreme Court ruled that set of tariffs illegal.
The reason to keep watching is the president's own conviction. "So bottom line, he loves tariffs. He thinks they're a solution, not a problem." He treats the trade deficit as a scorecard for how the United States is doing, and tariffs as the fix.
The administration has said it intends to get back to the pre-ruling level. She named Treasury Secretary Bessent and US Trade Representative Jamieson Greer, and said investors should expect more tariff announcements.
The long-run reason tariffs persist is revenue. The deficit looks materially better with them, and she said it is revenue she could see people "becoming quite addicted to" regardless of their politics — which is why she expects them to survive whoever wins in 2028.
The legal authority sits with the president already, delegated by Congress through acts of 1962 and 1974.
The politics are regional rather than popular. Voters do not love tariffs, she said, but the protectionist, pro-union framing plays well in parts of the country that matter to presidential campaigns.
Bonus Insights
The secular tax theme nobody is discussing is the gap between how capital and labor are taxed. Cantrill said capital gains are taxed at a much lower rate than wage income, that many capital owners pay less still because of loopholes, and that Democrats in particular could look at closing the gap alongside Social Security reform. "This is like no one's talking about this right now."
Two bills she thinks could actually pass in a split Congress are housing and immigration — housing because both sides want it, immigration because there are common-sense approaches on both sides despite the rhetoric, though she does not think it likely.
From 2027 onward, she expects everything to be about 2028, with President Trump enjoying the kingmaker role in the Republican nominating contest, whether the nominee is JD Vance, Secretary Rubio or someone else, and crowded primaries on both sides.
Her one market forecast about that: "I think that's probably actually good for democracy but bad for markets" — every economic plan released will move the market, which she said may restore the reaction function investors are used to.
Cantrill said the best part of her job is the client contact, and that the next few years will be stressful for clients and enjoyable for her.
Thomas closed with her own recap, restating PIMCO's split-Congress base case and warning listeners not to read gridlock as two boring years, with immigration, tariffs and a possible 2031 Social Security benefit cut all live into the next presidential term.
Cantrill's bottom line is that Washington is not currently worth trading on a headline-by-headline basis, but that two things are mispriced: the oil market's assumption that supply disruptions resolve themselves, and the chance that a Congress which has legislated nothing on artificial intelligence eventually does so all at once and badly.
Products, Companies & Tools Mentioned
PIMCO (Her employer of 20 years, positioned for steeper curves — underweight the long end, overweight roughly two-to-seven years — and buying volatility rather than avoiding it)
SoFi (Thomas's firm, which produces the show; she writes its On the Money column)
Pew Research Center (Source of the survey putting about 80% of voters on the negative side of artificial intelligence)
Strategic Petroleum Reserve (The government's main lever on oil inventories, which she said is at its lowest level since the early 1980s)
Social Security (The trust fund's own projection of a roughly 20% benefit reduction in 2031 is, in her view, the forcing mechanism for a deficit deal)
Books & Resources Mentioned
On the Money (Thomas's weekly column in SoFi's newsletter, which she points listeners to at the close)
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