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Key Takeaways

1.   As of early Sunday afternoon, indirect Iran-US negotiations are ongoing, but no agreement has been signed.

2.   The US midterm elections now handicap as a zero or one seat R gain in the Senate and neither party making more than a small gain in the House.

3.   Even if the Iran War continues, the US economy is on an even keel and is now gaining momentum. That is unlikely to change.

4.   Over the early months of this year, Ukraine has been winning its war against Russia. The evidence for Russia being forced into a negotiated settlement this year is increasing.  

The Current Situation in the Iran War 

As of early Sunday afternoon, the negotiations between the US and Iran are still underway. No agreement has yet been signed.

The Strait of Hormuz has been effectively closed to ships headed to or from Iranian ports by a US Navy blockade. Some other ships are being permitted by the Iranians to exit based on negotiated deals. Still other ships are using stealth to avoid the Iranians and to transit out of the Persian Gulf through the Strait of Hormuz.

The shooting war is now in a ceasefire. If the shooting war resumes, the US and Israeli attacks on Iranian military, government, and defense industry targets are sure to resume. But it is also quite likely that numerous Iranian economic assets will be added to the target list. That will probably include major road and rail bridges, power plants, oil and gas terminals, and other economically valuable Iranian assets.

Including them would put much more political, economic, and financial pressure on the Iranians to cut a deal to end the war. That seems to be what Trump is counting on. But the hardliners in Iran seem to believe that Trump will cave. We’ll see.

Trump has established three red lines he is highly likely to stick to and enforce.

They are:

1.   A free, open, and safe Strait of Hormuz and Persian Gulf guaranteed.

2.   Shipment of Iran’s current supply of enriched uranium out of that country.

3.   An enforced prohibition on future uranium enrichment by Iran.

Those red lines are real. If they are not met through current or future negotiations the shooting war will restart.

FACTS & REALITIES 

The US and Israel have been in a major war with Iran for over three months. Below is a list of realities I think will help you understand where we are and where we are probably even as we appear to be headed into Stage I of a negotiated peace deal.

1.   Iran’s military has been mostly defeated. It has lost almost all its defensive capabilities against air and naval attacks except hiding its remaining missiles, drones, small boats, and other weapons. But Iran still has offensive military capabilities, especially missiles, drones, and small boats with weaponry which can swarm ships in the Strait of Hormuz. An important consideration is that Iran can still do major damage to the Gulf Arab countries.

2.   The Iran defense industrial base (DIB), its various defense industries, has been mostly destroyed.

3.   A large ground invasion of Iran by the US will not occur and will not be necessary.  

4.   Do not count on regime change in Iran. The regime may survive even if it must accept a demeaning settlement of the war.

5.   The formation of a new post-war maritime alliance to protect the waters of the Middle East is now in its early stages. About 50 nations have indicated interest in participating, but only after the war is over. The US is now participating in the discussions and seeking allies for what it is calling a “Maritime Freedom Construct”.

6.   NEW – The Israel-Hezbollah War in Lebanon is near certain to continue even if there is a tentative deal in the Iran war.

A New Reality for the Midterms 

CHANGES:

·      The primary results over recent weeks from most states did not change anything fundamental in my handicapping of the midterms.

·      Last week there was an important primary in Maine for the D Senate nomination. Graham Platner was the prohibitive favorite to win that nomination and did so. He is a self-proclaimed communist and is a political “kook.” Revelations in recent days also suggest he has a very checkered background with women. More on the implications of that race in future weeks, but his problems suggest the incumbent R Senator, Susan Collins, will hold the ME seat.

I’m going out on a limb and suggesting that the way we have been analyzing midterms for decades is now misleading us. Fundamental changes have occurred and are still underway in various structures and realities of our politics, especially for the election of House members.

Historically, the party controlling the White House has lost an average of 26 House seats in midterm elections. But this year’s midterms now handicap far differently than that.

The structure and realities of US election campaigns have changed dramatically. The old rules and formulas are no longer reliable. Consider the evidence for that.

·      American partisanship has hardened. There are now fewer split-ticket voters and swing voters who go back and forth between the parties. Straight ticket voting has increased because of the antipathy, even hatred, between the parties. These changes make it less likely that either party will win midterm elections with massive wins.

·      The Democrats have moved significantly to the left and away from the center, while the Republicans have remained right of center where they have been for years. The US is still centrist. 

·      Widespread redistricting/gerrymandering, especially since the last election, has markedly cut the number of House races likely to be competitive. As recently as the 2022 midterms, about 60 House races were rated as competitive while this year it appears the number of such races will be less than half of that. At this time the UVA Sabato “Crystal Ball” has only 16 House seat races rated as “toss-ups,” 13 R seats and 3 D seats.

·      Trump, the Rs, and the Ds ALL have much higher disapproval scores than approval scores. THE VOTERS ARE VERY UNHAPPY WITH THE PRESIDENT AND WITH BOTH PARTIES. Normally the party controlling the White House/presidency gets punished because the party out of power looks more appealing. That is a “throw the bums out” phenomena.

But this year both parties and the President are being rejected. Trump’s approval rating in the recently 

released Harvard/Harris poll among likely midterm voters is 46% approve and 52% disapprove – a net of minus 6%. The R party is at 45% approve and 55% disapprove – a net of minus 10%. The D party is at 44% approve and 56% disapprove – a net of minus 12%.

That same poll now has the Ds ahead of the Rs by 4% (52% to 48%) in the choice between House candidates.

·      In the 2024 elections, the Democrats strategy of completely focusing on Trump failed. Many voters disliked Trump and still do, but that is not enough for most to vote D. Voters want to know what the Ds are going to do for them and what problems the Ds are going to solve. In 2024, the Harris-Walz campaign never provided a good answer. Notice that the Ds are making the same mistake this year.

In an election year where the electoral system looks fundamentally changed, we also see the Rs with some unusual advantages and the Ds creating an increasing number of problems for themselves.

·      Led by President Trump, R fundraising this year is likely to be much higher than D fundraising. It is likely that R funding of the eight competitive Senate races will be over $100 million each, and in most states well over $200 million each. The Ds are unlikely to be able to match that. Similarly, in the 20-30 competitive House races, R fundraising and spending in competitive districts is likely to be over $50 million each. Again, the Ds will be hard-pressed to match that.

·      With the Democrats now lambasting billionaires and campaigning across the country to “tax the rich,” it is less likely that the rich will fund D campaigns, which they have done in the past. And some angry rich folks who normally fund the Ds may fund some R campaigns.

·      The trend so far this year is for the Ds to nominate candidates farther to the left than they have in the past. That will continue. By contrast, the Rs are nominating few “kooks” and mostly conventional center-right candidates. D candidates farther to the left are likely to find winning in November harder than traditional center-left candidates would. 

·      Avowed socialists like Zohran Mamdani and AOC have become the faces and voices of the Democratic party. That may not go over well with centrist American voters. Many Democratic candidates believe socialism can work (IT CANNOT) and will forcefully push it. That will work against them and the Democrats in general. 

·      The Ds are in the process of nominating quite a few “kooks” and extreme radicals this year. Senate nominees Graham Platner in ME and James Talarico in TX are “kooks.” The Ds also look headed toward choosing radical nominees in the important MI Senate contest and in the MN Senate race. Numerous D nominees are socialists, and/or antisemites, and/or anti-white racists. They are far from the center of American politics.

·      The D 2024 postmortem of those elections noted the importance of reconnecting with the voters in the south and Middle America. The Ds are again ignoring those groups this year and focusing on left-leaning radicalism.

·      It is certain that the Rs will run well-funded media campaigns against the leftist radicalism of the D party and many of its candidates. Effective campaigns like that will go a long way toward indicating which party will control the Congress next year.

·      The recent Louisiana v. Callais Supreme Court decision unexpectedly gave the Rs the opportunity to redistrict a few states and gain several seats they were expected to lose. In LA, AL, TN, and other states, efforts succeeded in eliminating previously required “majority-minority districts.”

·      A month or two ago, it looked like the redistricting wars would end up close to a draw. But recent changes such as the Louisiana v. Callais decision and the VA Supreme Court throwing out the VA gerrymandering now suggest the Rs will have a net gain solely due to redistricting of 10 to 14 seats, up from 8 to 12 seats a month ago.

Considering these major changes, which have occurred or are now occurring, I am shifting my previous analysis that the Ds would gain a dozen or so seats in the House to an analysis that neither party will make much of a gain in the House. My analysis is that the Rs will gain zero or one seat in the Senate, down from zero to two seats previously.

But remember, it is five months until the midterms, and much can change. I’ll update my analysis regularly.

The Economy and Markets 

UPDATE - The US Economy Overall

We are now three months into the Iran War. Perhaps now it will go into an extended pause.

It is comforting to see how limited the effects of the war have been on the US economy and on the financial markets. It is very unlikely the war will seriously harm the US economy. Consider:

·      10-year treasuries are now up about 40 basis points (.40%) from the first of the year, before the war started. That hurts but not seriously.

·      The major stock market indices are at or near record highs. The huge SpaceX IPO was a success.

·      The US job market has turned very positive over the last three months.

·      Unlike almost all other nations, the Iran War has had only limited negative effects in the US with the worst widely felt negative being a $1.00-1.50 rise in the cost of gasoline. That has pushed inflation up noticeably.

As we move into summer, the economy looks very positive overall. Corporate earnings have been very strong and look like they will continue that way. Real economic growth in 2026 looks likely to be solid and a 2026 recession looks very unlikely.

Last year’s trends were for both very low numbers of layoffs but also limited hiring. Several stats just out for May suggest hiring is picking up while layoffs remain low.

The Truth about Affordability

The affordability issue is quite real and dominates the concerns Americans now have about their personal lives. It has been the dominant political issue since the last half of 2022. It and inflation are two sides of the same coin and have caused widespread economic distress.

The major causes of the recent inflation were threefold. First, the lockdowns caused by Covid devastated supply but didn’t change demand as much. When supply is lower than demand prices go up, sometimes steeply. The other two causes were the Fed expanding the money supply greatly and the profligate spending of the Biden administration. Both increased demand and prices.

Inflation in 2022 was 7.0%, 6.5% in 2023, 3.4% in 2024, and 2.7% in 2025. Most employees got raises during those years but not enough to cover the increased costs. Thus, the affordability crisis was created. Many families are still behind where they were financially before the pandemic.

That crisis continues today. When asked to name the most important problem facing them personally by the Harvard/Harris poll folks, 51% named affordability/inflation, an astoundingly high figure for a single issue. That issue has dominated public opinion for years and is almost certain to do so throughout 2026 and the midterms, regardless of whether the Iran War ends. The war exacerbates the issue but did not create it. And the issue goes well beyond just gasoline prices.

Economic Data

·      NEW – The Federal Reserve just released an update of the net worth of US households. As of the end of March that statistic was an amazing $174Trillion. Such a huge amount of wealth is one of the reasons stock market records continue to be set.

·      NEW – The CPI rising 0.5% last month was bad news on the inflation front. That increase was caused almost totally by gasoline price increases. 

·      An unexpectedly high 172,000 new jobs were added in May. The unemployment rate stayed at 4.3%.

·      The federal job openings report showed a big increase from 6.9 million job openings to 7.6 million job openings. Multiple stats suggest that labor demand is increasing.

·      Retail sales rose 0.5% month over month, a positive sign of a growing economy. 

·      NEW - The latest estimate for Q2 GDP from the Atlanta Fed GDPNOW is a strong +3.3%.

·      NEW – Earnings reports for Q1 continue to look very strong.

·      NEW – New claims for unemployment insurance last week stayed low at 229,000. This demonstrates that layoffs are still quite low.

Global Watch Updates

Is the Ukraine War Headed to an End? … Probably

CHANGES:

·      Recently, President Zelenskyi of Ukraine proposed he and Putin meet to negotiate a peace deal. Putin rejected the offer.

·      President Putin and other Russian officials continue to demand maximalist Ukrainian concessions which Zelenskyi could never accept unless the Ukrainians were losing the war badly, which they are not. As described below, the Ukrainians now have the momentum in the war and that momentum is increasing. They could build on that momentum or lose it. But 2026 does not look like just a repeat of the war’s stagnation of the last two years. 

·      During a major international economic conference recently in St Petersburg, the Ukrainians attacked military and energy sites near the city to send a message to the Russian people and the world that Russia can no longer protect its own territory. Many such attacks are being launched by the Ukrainians and still more are certain as they produce thousands of new drones every day.

·      Similarly, in Russian occupied Ukraine both civilian and military vehicles are being hit by Ukrainian drones making transport very hazardous. Logistical transport of military supplies and even civilian transport of people and goods are getting very hazardous in Crimea and in other Russian occupied Ukrainian provinces.

·      In both Russia proper and in occupied Ukraine the Ukrainian attacks on refineries are creating severe petrol shortages. These shortages are likely to get worse.

·      Neither side is making important ground gains. The stalemate has hardened even though the shooting continues.

My overall analysis is that the shooting in the Russia-Ukraine War will end before the end of this year in a negotiated settlement. The reason is that Russia is now losing the war militarily, politically, economically, financially, and technologically.

Month by month this year there have been growing indications that the Ukraine War has moved into a new phase, one much more favorable to Ukraine. April and May were bad months for the Russians in the war, and June has been worse.

Additional factors have shifted dramatically to a Ukrainian advantage.

·      Almost all Russian attempts to gain ground this year have failed badly with large manpower losses for them. The beginning of a planned spring-summer Russian offensive has been stalled by the Ukrainians and may never get underway. So far in 2026 the Russians have lost more territory in Ukraine than they have gained.

·      Russian casualties have been unsustainably high, higher than their ability to replace lost troops with new recruits. New Ukrainian drone technology and tactics are substantially increasing Russian casualties, while limiting Ukrainian casualties. In Q1, the Russians had about 35,000 casualties per month but were able to replace only about 23,000 of them with new recruits. 

·      Extensive hard evidence now shows that new drone technology and tactics developed by the Ukrainians have crippled many of the tactics which previously worked for the Russians. In the land war, the stalemate continues. But the Ukrainians have gained control above the battlefields. Their new drone tech and tactics are stymying the Russians at the front and for many miles into the Russian rear. Depots, barracks, weapons systems, command centers, and even road traffic there are now in Ukrainian range and are targets.

·      Ukrainian missiles and drones are also doing increasing amounts of serious damage to Russian energy and defense industries in the western half of Russia. Ukrainian air attacks can now reach over 1,000 miles into that country. This is a huge problem for the Russians for which they seem to have no good defense.

·      Week after week Ukraine’s missiles and drones are seriously cutting Russia’s ability to export oil from their Black Sea and Baltic export terminals. If the Ukrainians can continue creating such major damage at the Russian oil export terminals, the Ukraine War will be in a whole new phase. Ukrainian drones and missiles are also doing serious damage to defense industries in Russia.

Because of the successful missile and drone attacks on Russian, Putin has ordered major drone and missile attacks on Ukraine’s civilians and non-military infrastructure. It appears the Ukrainians are responding in kind in Moscow and St Petersburg.

·      According to many economists, including Russian analysts, Russia’s economy is stagnating and near collapse outside of the heavily subsidized defense industries. A major economic and fiscal crisis is at hand and Putin is getting desperate.

·      Putin is also panicking because he fears a coup against him.

Ideas to Remember 

1.   The US is the world’s dominant power. China and Russia are declining in power relative to the US. 

2.   Take Trump seriously but not literally. Remember he is always setting up the next negotiation. His off-the-cuff comments frequently cause major confusion.

3.   The Republicans have become the party of the working-class and middle-middle class.

4.   In politics, it’s the economy, stupid. The average household will be able to balance their budget or else the party in power will be punished.

Political Psychiatry 30-Day Test

With daily disturbing news, teach yourself to take a deep breath and ask if that news will matter much in 30 days or so. Only rarely will it be important. So, ignore it, and lower your blood pressure.

Tuchfarber Report Goals

Predictions – Methods & Standards

My method – gather accurate facts, analyze them with no biases, and make accurate predictions.

The Tuchfarber Standard – make predictions on important issues when I’m over 80% convinced the prediction will be correct.

I’m sure many of you chuckle when I claim I do unbiased analyses. But if my biases, which I do have, and hopes influenced my predictions, how did I get 97% of my 248 predictions correct over the last four years?

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Al Tuchfarber PhD -- Professor Emeritus of Political Science, University of Cincinnati

[email protected]    

Tuchfarber Political-Economics LLC

TuchfarberReport.com

Dr. Tuchfarber founded the Ohio Poll, one of the country’s most accurate, while directing the Institute for Policy Research at the University of Cincinnati for four decades. He is an engaging, informative, and dynamic speaker. Al has published well over 100 publications about politics, political-economics, society, and research methods.

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