The Democratic Party in Midterm

At the Republican convention in Dallas, amidst Donald Trump's midterm, the theme of the red scare once again took center stage. House Speaker Mike Johnson and Representative Steve Scalise spoke about the arrival of communists in Congress and the “Bolshevik revolution” within the Democratic Party. Trump also stated that Democrats are competing as communists in the November elections, citing over 60 mentions of communism during the convention.

What's Changing in the Republican Narrative

Republicans are attempting to associate the Democratic Party with communism to attack the more left-leaning wing that has won primaries in states like Colorado, Michigan, New York, Pennsylvania, and Florida. They believe this strategy can exploit voter discontent, Trump's war in Iran, and high prices at gas stations and markets. The Republican National Committee's social media account posted: “Stalin, Mao, Castro. Democrats.”

How the Democratic Party's Left Wing is Positioning Itself

Although no candidates with a chance of winning have been identified as communists, the party's more left-leaning wing has gained strength. Senator Bernie Sanders, a leader of the progressives, celebrated elements of the 1959 Cuban Revolution in 2020, and candidate Darializa Avila Chevalier, who won a primary in New York in June, had previously suggested more Marxism books in public libraries. In response, a group of centrist Democrats sent a letter stating they are “capitalists, not socialists.”

Investors and the Expectation of a Divided Congress

Wall Street projects that the midterm Congress will be divided: Democrats in the House and Republicans in the Senate. This configuration is seen as favorable for markets, as it tends to reduce the possibility of drastic policies. Stifel strategist Brian Gardner forecasts a market recovery after the elections, provided Democrats win the House without an overwhelming victory. Evercore ISI recommends a “straddle” strategy on the SPDR S&P 500 ETF to hedge against volatility.

Democratic Leaders' Reaction to the Republican Strategy

Some Democrats fear that the rise of the socialist wing could help Republicans portray them as extremists. Representative Brad Lander, a New York socialist, stated that democratic socialists want an extension of democracy in workers' lives. Representative Jamie Raskin questioned Trump's fitness to speak about communism, pointing out the president's tendency to meet with authoritarian leaders like Xi Jinping and Kim Jong-un.

Impact on November Elections

Republicans, who might lose control of both Houses, are using the red scare as a campaign tool. However, the strategy may fail to attract voters who view Trump's rhetoric as aggressive. The labeling strategy could be questioned by Republicans like Don Bacon, who suggests focusing on concrete policy positions. The expectation of a divided Congress keeps the market cautious but also opens opportunities for sectors such as artificial intelligence, defense, and healthcare.

With information from O GLOBO, ISTOÉ DINHEIRO, CNN Brasil.