by Andrew Vargas
by Andrew VargasPresidential Election effect on the Markets
Which U.S. Presidential Candidate does Wall Street want to win?
Presidential candidates make lofty promises. They promise that their policies are the best way to make America great again. But when politicians promise change, they don’t know how to articulate the specific actions to make those changes a reality. For Wall Street, vague political rhetoric can spell uncertainty. And the markets will shudder to think that someone could make their lives, careers, and the economy worse.
Hillary Clinton and Donald Trump are going head-to-head in the general election in November. Both have different ideas and policies for the United States going forward. But, Wall Street has a strong opinion over which one they prefer occupying the oval office.
Wall Street is one of Hillary Clinton’s biggest campaign contributors. They donated 28 million dollars to her campaign so far, despite the anti-Wall Street policies she advocates. They know Hillary Clinton and understand where she stands because she has a voting record. To them Hillary is an extension of the Obama presidency. And with the economy on the upswing because of his policies, Clinton is their best bet on continuing economic growth.
Wall Street doesn’t want a Donald Trump presidency because there’s too much uncertainty surrounding his policies and the wishy-washy way he defends them. It makes his policy positions sound ludicrous and unattainable. If he became president and many of his programs made it through Congress. It would create another huge recession and destroy any progress the U.S. economy has made since the financial crisis of 2008.
Which assets might be affected?
His first act as president would likely be repealing Obamacare and allow full interstate competition for the sale of health insurance. Doing this would be bad for the healthcare, and insurance industries. In the past four years the S&P Healthcare Index gained around 86% and much of that has to do with the Affordable Care Act. The ACA has created a lot of new customers to companies in the medical and pharmaceutical industries. And Donald Trump wants to repeal what is objectively seen as a success because Obama’s name is attached to it.
Hillary Clinton will make reforms to the ACA or expand it, but other facets of the healthcare industry could be negatively affected by her presidency.
Hillary Clinton has been critical of the pharmaceutical industry on the campaign trail. If she wins the presidency, she will put pressure on pharmaceutical companies to keep the costs of drugs affordable. Even though pharmaceutical companies say the price increase goes into research and development. Wall Street pressured those companies to put that money back into shareholders pockets instead of research. These buybacks have lead to share prices being artificially inflated. And a Clinton presidency could make pharmaceutical and biotech shares plunge even further.
One of the biggest criticisms of Hillary Clinton is her coziness with Wall Street bankers. While she seems like the candidate whose policies favour Wall Street and the banking industry. She wants to curry favour with the middle-class voting block by teaming up with Senator Elizabeth Warren.
And many on Wall Street have been vocal about not wanting Warren as her running mate. Elizabeth Warren was instrumental in the Dodd-Frank Act and created the Consumer Financial Protection Agency. She has been very effective in articulating anti-Wall Street sentiment, and Clinton would lose a lot of support from Wall Street if Elizabeth Warren were on the ticket come November.
Donald Trump explaining his positions on monetary policy is like listening to a child explain the plot of a book they didn’t read.
Trump wants to renegotiate debt and have U.S. creditors buy back loans at a lower payment. He wants to refinance U.S. Treasury bonds meaning investors would get less money than they are owed. U.S. debt is a safe investment. Many retirement accounts are full of Treasury bonds. Refinancing and buying them back at a discount would bring uncertainty to the economy. It would cause Interest rates on U.S. debt to skyrocket, and banks would be less likely to lend money.
Donald Trump has said that he is open to reappointing Federal Chairwoman Janet Yellen and putting other people in to run the Fed. And he wants Congress to audit the Federal Reserve. The Federal Reserve is an independent agency only concerned with monetary policy, and should be isolated away from the influence of politicians. By giving a branch of the government oversight it would politicize an independent agency giving them a directive that would be in favour of the party that controls the house.
Federal chairwoman Janet Yellen has done more than a serviceable job. She helped to guide the markets through the financial crisis. So replacing her for no good reason and allowing Congress to audit the Federal Reserve is not only irresponsible monetary policy – It could cause instability and fracture an already volatile economy.
Election history
Hillary Clinton and Donald Trump are putting out ideas they believe would be good for the economy. One candidate has the majority of Wall Street on their side. The other offers a lot of uncertainties, and his policies would completely reverse any gains in the stock market the past four years. History has shown that during an inaugural year the S&P 500 experiences a bear market no matter who wins. But the Dow Jones usually performs better when a democrat is in the oval office.
Despite polling data showing voters think Donald Trump would be better for the economy. Wall Street is backing Hillary Clinton because she is the seasoned politician with a proven track record and policy ideas that would continue to foster economic growth. Wall Street knows what they are getting with Hillary Clinton and Donald Trump has demonstrated he’s not a smart businessman, but plays one on TV.
