“Barack Obama hasn’t taken baby steps towards socialism, but a giant step,” argues bond portfolio manager Stephen Smith.

He is only one individual who is hoping for the Republican Party, nicknamed GOP, to retake Congress in this November’s mid-term elections, but many on Wall Street are unhappy with the Democrat-controlled Congress and US President Obama.

Smith, managing director and co-head of global fixed income at Philadelphia-based Brandywine Global Asset Management, discussed his frustrations with the Democrats on a recent trip to Asia to meet clients.

He compares Obama to Franklin Delano Roosevelt, whose policies established government agencies to ensure political rights to healthcare, employment and housing in the middle of the Great Depression. He says FDR’s move in 1938 to raise marginal tax on income and retained earnings led to a severe double-dip recession.

Similarly, he sees in Obama a desire to redistribute wealth coupled with a massive fiscal stimulus plan that has failed to improve employment or jump-start economic growth.

As an investor, he fears the US is headed down a path where, like Europe for the past two decades, it will suffer sustained below-trend growth as a cost to social democracy, marked by higher taxes, redistribution of wealth from the private to the public sector and chronically high unemployment.

“Greece did the world a favour,” Smith says, by showing what happens when a government’s debts exceed 100% of its gross domestic product. The private sector refuses to continue funding such profligacy. Meanwhile, governments in Europe have a “lack of hope” because the austerity they require to trim their deficits will also curb the growth they desperately need.

Smith says the mid-term elections next month will serve as a referendum on whether the country wants to continue down the big-government path, or change direction.

“The surprise may be that the US and Europe do better than expected,” Smith says. US corporations remain strong, with $1.8 trillion of cash and generating $3 trillion worth of free cashflow this year.

But fears about the Democrats’ agenda, he argues, are why companies are sitting on cash rather than investing. Finance and healthcare make up 37% of US GDP, and it is these sectors where ‘Obamacare’ and bank reform have caused the most regulatory uncertainty.

“CEOs have no vision of how to spend money,” Smith argues.

He thinks a GOP victory in November will get companies to invest again: “If you can convince the government that it’s the private sector that drives job growth, it can have an impact.”

Anticipating a stop to Democrat agendas, Smith is cutting duration in his portfolios of US securities. He thinks the “lack of hope” mood pervading the markets underestimates the good news of a Republican victory in November.

“Be defensive, because the yield curve could flatten,” he says. “Fears of inflation are either unrealistic or way too early. Invest in bonds for the coupon, because equity performance will likely be flat.”

He says if investing in bonds in 2009 was about currency and 2010 was about duration, post-November it will be about securing the coupon and reducing duration.

“The risk of a rise in interest rates is acceptable if you’re also getting economic growth,” Smith says.