Facing the prospect of a government shutdown and an unruly majority in the House that took down his predecessor just three weeks ago, new House Speaker Mike Davis “is being thrust into some of the biggest policy issues we’ve ever seen,” Michael Townsend, Schwab’s managing director and chief lobbyist, told advisors at the IMPACT conference today.

Johnson will need to “wrestle with a very difficult caucus” as he attempts to pass the appropriations bills needed to avert a government shutdown by Nov. 17, Townsend said, noting that while the new speaker will probably get a grace period, he may face the same aversion to a stop-gap spending measure that led to Rep. Kevin McCarthy’s ouster.

Ironically, Johnson, who voted against the stop-gap spending bill that averted the government shutdown in October, is reportedly considering such a short-term bill that funds the government at current levels until Jan. 15 or April 15. That will give Congress time to work on reaching a consensus on 12 delayed spending bills, Bloomberg reported.

While the threat of an imminent shutdown has decreased significantly, at least in the industry’s mind, that’s not to say it won’t happen, Townsend noted.

Even if Johnson can persuade his caucus to compromise, that’s “not even taking into consideration that you have a Democrat-controlled Senate,” he said. The Senate is supporting President Biden’s $162 billion in spending requests, but has passed none of the appropriations bills necessary to avoid the shutdown, Townsend said. 

In addition, the House made no attempt to vacate the rule that allows a single lawmaker to vote to fire the House speaker. That rule allowed Florida Rep. Matt Gaetz to remove McCarthy for agreeing to negotiate a temporary spending package to keep the government open in early October.

“I think Johnson will get a grace period, but that rule is always looming,” Townsend said, noting that it will be “a really, really tricky time” for the new speaker going forward.

The lobbyist called the election of Johnson “an absolutely astonishing turn of events.” The deputy whip in the House and a constitutional lawyer serving his fourth Congressional term for Louisiana, he represented President Trump during both of his impeachment trials.

“He doesn’t really have a high profile and his most redeeming attribute to win this was that he actually hadn’t made any enemies along the way. I think everybody was sort of like, ‘Well I don’t hate this guy, so I think I’ll vote for him.’ Because as we’ve seen, there were plenty of people who hated a lot of the other guys. And that was a trouble spot for them,” Townsend said.

Known for his fiery exchanges on the House Judiciary Committee, Johnson was the third nominee chosen by his GOP peers to serve as speaker. In addition to being charged with averting a government shutdown without being fired, his speaker duties include copious fundraising for his caucus, elections and negotiating a new debt ceiling and expiring tax provisions.

Luckily, the markets react very little to government shutdowns and have even gained ground in the past, Townsend noted.

The same is true for the market during the fourth year of each presidential term. In fact, the S&P 500 has increased in the year following every mid-term election since 1950, averaging a 13.5% return, he added.